Is the Lending Decision-Making Process Affected by Behavioral Biases? <br/>—Evidence from Southern Italy

Abstract

The objective of this article was to verify whether, in the decision-making process concerning bank loans issuance, managers have been influenced or not by how they perceive some personal characteristics of the applicant, even if these characteristics have nothing to do with the financial aspects typically analyzed to determine creditworthiness. In particular, we analyzed the impact of gender, age, beauty, race and education of the borrower on the probability to be funded. The study was conducted submitting face-to-face questionnaires to 212 officers working in the credit chain of 25 banks and data have been analyzed using the logistic regression model. The chosen setting was the south of Italy and in particular of the Campania region. The results show that there has been some influence of bias regarding gender, age and beauty, while no significant relationship has been found with reference to the racial discrimination or to the cultural level of the applicant. These results, which confirm the evidence already found in other settings by previous empirical analyses, would lead to highlight that there is an adverse selection mechanism in the provision of banks' credit capital.