Expertise in credit granting : studies on judgment and decision-making behavior

Abstract: How do experienced lenders make decisions? This dissertation addresses this question by investigating judgment and decision-making behavior of loan officers in banks as well as credit managers in supplying companies. The dissertation applies an integrated economic-psychological perspective and consists of seven parts: a comprehensive literature review and six separate empirical papers. Reviewed areas are research on judgment and decision-making (JDM), research on expert decision-makers, and earlier empirical work on experienced lenders. The six papers shed light on: (1) desirable personal attributes of expert credit analysts; (2) the use of software to track JDM behavior; (3) differences between novices' and experienced loan officers' JDM behavior; (4) the relationships between information acquisition, risk attitude, and experience; (5) attitudes towards credit decision support systems; and (6) attitudes towards requesting collateral. Employed methods were in-depth interviews, a nation-wide survey, and a computer-based experiment.On the whole, the empirical findings give an ambiguous picture of the alleged superiority of experienced lenders' judgment and decision-making behavior. On the one hand, experienced lenders seem to be capable, careful, and conscious of their responsibility. On the other hand, they tend to disagree and make contradictory judgments and decisions. The applied perspective and methodology are not only aimed at providing better insights into how experienced lenders make decisions, but can also stimulate future research on how professionals in other domains than credit granting make decisions.