Nonlinear incentives and mortgage officers' decisions

• 成果类型: Article
• 署名作者: Tzioumis, Konstantinos; Gee, Matthew
• 署名单位: United States Department of the Treasury; Office of the Comptroller of the Currency; University of Chicago
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.08.014
• 发表日期: 2013
• 页码: 436-453
• 关键词: Nonlinear incentives; Quotas

摘要

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. Published by Elsevier B.V.