The Effects of Branch Manager’s Characteristics on Micro-Lending Quality: Evidence from a Commercial Bank in Iran

Document Type : Research Paper

Authors

1 Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran.

2 Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran.

Abstract

Based on financial literature, when information asymmetry is present, the agency problem can affect the bank’s lending. In this regard, the contract between the bank and the bank’s agents (who are involved in the lending process) and monetary incentives are very crucial. Furthermore, the career concerns and the characteristics of the bank’s agents can affect the agents’ performance and the effectiveness of the bank’s monetary incentives. This paper investigates the effects of the characteristics of the branch managers on microloans quality in an Iranian commercial bank. Results show that (1) the micro-lending quality of the female branch managers is better than their male counterparts; (2) the quality of micro-lending managed by older branch managers (or branch managers who are closer to retirement age) is poorer than that of their younger counterparts; (3) the higher education of the branch managers improves the quality in micro-lending. 

Keywords

Main Subjects

References

Adams, R. B., & Ferreira, D. (2009). Women in the Boardroom and Their Impact on Governance and Performance. Journal of Financial Economics, 94(2), 291–309.
Agarwal, S., & Ben-David, I. (2018). Loan Prospecting and the Loss of Soft Information. Journal of Financial Economics, 129(3), 608-628.
Agarwal, S., & Wang, F. H. (2008). Motivating Loan Officers: An Analysis of Salaries and Piece Rates Compensation. Working Paper, Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=D8C137C6D907CF1F4F48072878B32D54?doi=10.1.1.209.837&rep=rep1&type=pdf.
Andersson, P. (2004). Does Experience Matter in Lending? A Process-tracing Study on Experienced Loan Officers’ and Novices’ Decision Behavior. Journal of Economic Psychology, 25(4), 471-492.
Beck, T., Behr, P., & Guettler, A. (2013). Gender and Banking: Are Women Better Loan Officers? Review of Finance, 17(4), 1279–1321.
Becker, G. (1962). Investment in Human Capital: a Theoretical Analysis. Journal of Political Economy, 70(5), 9–49.
Bellucci, A., Borisov, A., & Zazzaro, A. (2010). Does Gender Matter in Bank-Firm Relationships? Evidence from Small Business Lending. Journal of Banking and Finance, 34(12), 2968-2984.
Berg, T., Puri, M., & Rocholl, J. (2013). Loan Officer Incentives and the Limits of Hard Information. NBER Working Paper, 19051, 1-20.
Brown, L. D. & Caylor, M. L. (2009). Corporate Governance and Firm Operating Performance. Review of Quantitative Finance and Accounting, 32(2), 129-144.
Burke, R. J. (1997). Women on Corporate Boards of Directors: A Needed Resource. Journal of Business Ethics, 16(9), 37–43.
Byrnes, J. P., Miller, D. C., & Schafer, W. D. (1999). Gender Differences in Risk Taking: A Meta-Analysis. Psychological Bulletin, 125(3), 367-383.
Carter, S., Shaw, E., Lam, W., & Wilson, F. (2007). Gender, Entrepreneurship, and Bank Lending: The Criteria and Processes Used by Bank Loan Officers in Assessing Applications. Entrepreneurship Theory and Practice, 31(3), 427-444.
Cole, S., Kanz, M., & Klapper, L. (2015). Incentivizing Calculated Risk Taking: Evidence from an Experiment with Commercial Bank Loan Officers. Journal of Finance, 70(2), 537-575.
Croson, R., & Gneezy, U. (2009). Gender Difference in Preferences. Journal of Economic Literature, 47(2), 448-474.
Eckel, C. C., & Grossman, P. J. (2008). Differences in the Economic Decisions of Men and Women: Experimental Evidence. Handbook of Experimental Economics Results, 1(4), 509-519.
Fu, V. (1998). Estimating Generalized Ordered Logit Models. Stata Technical Bulletin, 8(44), 27-30.
Gneezy, U., Niederle, M., & Rustichini, A. (2003). Performance in Competitive Environments: Gender Differences. Quarterly Journal of Economics, 118(3), 1049-1074.
Halliday, C. S., Paustian-Underdahl, S. C., & Fainshmidt, S. (2020). Women on Boards of Directors: A Meta-Analytic Examination of the Roles of Organizational Leadership and National Context for Gender Equality. Journal of Business and Psychology, 36, 173-191.
Hertzberg, A., Liberti, J. M., & Paravisini, D. (2010). Information and Incentives inside a Firm: Evidence from Loan Officer Rotation. Journal of Finance, 65(3), 795-828.
Holmstrom, B. (1979). Moral Hazard and Observability. The Bell Journal of Economics, 10(1), 74-91.
---------- (1982). Managerial Incentives Schemes-a Dynamic Perspective. Stockholm: Stockholm School of Economics.
Imani Barandagh, M., Kazemi Olum, M., & Abdi, M. (2018). The Investigation of Gender Diversity’s Impact on The Directors Board’s on the likelihood of Internal Control Weaknesses. Valued and Behavioral Accountings Achievements, 3(5), 263-285.
Ioannidou, V., Pavanini, N., & Peng, Y. (2019). Collateral and Asymmetric Information in Lending Markets. CEPR Discussion Paper, 13905, 1-30.
Jensen, M. C. & Meckling, W. H. (1976). Theory of the firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305-360.
Kauko, K. (2009). Managers and Efficiency in Banking. Journal of Banking and Finance, 33(3), 546–556.
Kurdbacheh, H., Mehregan, N., & Taghavi, B. (2012). Is the Efficiency of Bank Branches Affected by the Characteristics of Branch Managers? Applied Economics, 3(11), 109-134.
Liu, X., & Koirala, H. (2012). Ordinal Regression Analysis: Using Generalized Ordinal Logistic Regression Models to Estimate Educational Data. Journal of Modern Applied Statistical Methods, 11(1), 242-254.
Montalvo, J. G., & Reynal-Querol, M. (2020). Gender and Credit Risk: A View from the Loan Officer’s Desk. Working Papers, 1076, 610-627.
Nekhili, M., & Gatfaoui, H. (2013). Are Demographic Attributes and Firm Characteristics Drivers of Gender Diversity? Investigating Women’s Positions on French Boards of Directors. Journal of Business Ethics, 118(2), 227–249.
Niederle, M. (2016). Gender. In J. Kagel and A. E. Roth (Eds.), Handbook of Experimental Economics (2nd Ed.). New Jersey: Princeton University Press.
Pearce, J. A., & Zahra, S. A. (1991). The Relative Power of the CEOs and Boards of Directors: Associations with Corporate Performance. Strategic Management Journal, 12(2), 135-153.
Post, C., & Byron, K. (2015). Women on Boards and Firm Financial Performance: A Meta-Analysis. Academy of Management Journal, 58(5), 1546–1571.
Salehi, M., Oradi, J., & Salari Forg, Z. (2016). The Effect of the Existence of the Audit Committee and its Characteristics on the Delay of the Audit Report. Journal of Accounting Knowledge, 7(26), 59-83.
Sepasi, S., & Abdoli, L. (2016). The Impact of Gender Senior Management on Conditional Conservatism. Women’s Psychological Social Studies, 14(1), 129-154.
---------- (2015). The Effects of Women’s Presence on the Board on Company Value and Financial Performance. Financial Accounting and Auditing Research, 8(29), 39-58.
Shavell, S. (1979). Risk Sharing and Incentives in the Principal and Agent Relationship. The Bell Journal of Economics, 10(1), 55-73.
Spence, M. (1973). Job Market Signaling. The Quarterly Journal of Economics, 87(3), 355–374.
Talke, K., Salomo, S., & Rost, K. (2010). How top Management Team Diversity Affects Innovativeness and Performance via the Strategic Choice to Focus on Innovation Fields. Research Policy, 39, 907‐918.
Triana, M. D. C., Miller, T. L., & Trzebiatowski, T. M. (2013). The Double-Edged Nature of Board Gender Diversity: Diversity, Firm Performance, and the Power of Women Directors as Predictors of Strategic Change. Organization Science, 25(2), 609-632.
Udell, G. F. (1989). Loan Quality, Commercial Loan Review and Loan Officer Contracting. Journal of Banking and Finance, 13(3), 367-382.
Williams, K. Y., & O’Reilly, C. A. (1998). Demography and Diversity in Organizations: A Review of 40 Years of Research. In B. M. Staw and L. L. Cummings (Eds.), Research in Organizational Behavior. London: Greenwich JAI Press.
Williams, R. (2020). Adjusted Predictions and Marginal Effects for Multiple Outcome Models and Commands (including Ologit, Mlogit, Oglm, and Gologit2). Notre Dame: University of Notre Dame.
---------- (2006). Generalized Ordered Logit/Partial Proportional Odds Models for Ordinal Dependent Variables. The Stata Journal, 6(1), 58-82.
Iranian Economic Review
Volume 27, Issue 2
July 2023
Pages 655-692

Files

Share

How to cite

Statistics