Motivating Loan Officers: An Analysis of Salaries and Piece Rates Compensation
Whether incentive contracts provide the right incentives to individuals in organizations is a central question in modern economic theory. We study loan officers’ incentives for loan origination and their choice of effort to assess loan quality under fixed-wage salary and a piece-rate contract based on loan origination. We find that whether piece-rate contracts distort loan officers’ incentive to search for bad credit depends crucially on the strength of the monetary incentive and the information asymmetry between the bank and the loan officers. We further examine the relationship between loan origination decisions, loan size and other loan characteristics under the two compensation schemes, and derive a number of predictions regarding these two types of remuneration. Using a unique dataset on loan officer compensation from a major commercial bank, we test these implications and find results that generally support the predictions of our model.
Incentive Compensation Small Business Lending Loan Officers Piece Rate and Salaries
Sumit Agarwal Faye H. Wang
Federal Reserve Bank of Chicago University of Illinois - Chicago
国际会议
广州
英文
1-49
2009-07-07（万方平台首次上网日期，不代表论文的发表时间）