Nonlinear incentives and mortgage officers’ decisions |
| |
Authors: | Konstantinos Tzioumis Matthew Gee |
| |
Affiliation: | 1. Compliance Risk Analysis Division, Office of the Comptroller of the Currency, Washington, DC 20219, USA;2. Harris School of Public Policy Studies, University of Chicago, Chicago, IL 60637, USA |
| |
Abstract: | In the aftermath of the recent financial crisis, banks should ensure that their incentive compensation policies appropriately balance long-term risk with short-term rewards. Using daily output data from mortgage officers in a US commercial bank, we test the notion that nonlinear contracts create time-varying incentives for the employees and impose costs on the firm. We provide empirical evidence that mortgage officers greatly increase their output toward the end of each month, when the minimum monthly quota is assessed. This occurs through a combination of reducing the processing time and approving some marginal applications. We also find that mortgages originated on the last working day of the month have a higher likelihood of delinquency. |
| |
Keywords: | G21 J33 M52 |
本文献已被 ScienceDirect 等数据库收录! |
|