The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Information and Incentives Inside the Firm: Evidence from Loan Officer Rotation
Published: 05/07/2010 | DOI: 10.1111/j.1540-6261.2010.01553.x
ANDREW HERTZBERG, JOSE MARIA LIBERTI, DANIEL PARAVISINI
We present evidence that reassigning tasks among agents can alleviate moral hazard in communication. A rotation policy that routinely reassigns loan officers to borrowers of a commercial bank affects the officers' reporting behavior. When an officer anticipates rotation, reports are more accurate and contain more bad news about the borrower's repayment prospects. As a result, the rotation policy makes bank lending decisions more sensitive to officer reports. The threat of rotation improves communication because self‐reporting bad news has a smaller negative effect on an officer's career prospects than bad news exposed by a successor.
Information and Incentives Inside the Firm: Evidence from Loan Officer Rotation
Published: 05/07/2010 | DOI: 10.1111/j.1540-6261.2010.01553.x
ANDREW HERTZBERG, JOSE MARIA LIBERTI, DANIEL PARAVISINI
We present evidence that reassigning tasks among agents can alleviate moral hazard in communication. A rotation policy that routinely reassigns loan officers to borrowers of a commercial bank affects the officers' reporting behavior. When an officer anticipates rotation, reports are more accurate and contain more bad news about the borrower's repayment prospects. As a result, the rotation policy makes bank lending decisions more sensitive to officer reports. The threat of rotation improves communication because self‐reporting bad news has a smaller negative effect on an officer's career prospects than bad news exposed by a successor.