A note on the role of memory in commercial loan officers' use of accounting and character information

Article Abstract:

The concept of 'the five C's of credit (character, capacity, capital, conditions and collateral)' is used as a knowledge structure that commercial loan officers may employ to incorporate accounting information into their lending decisions. The main hypothesis of the study is that loan officers can recall more judgment-consistent information that inconsistent information. A total of 128 participants with a wide range of commercial lending experience are required to read a brief description of a term loan and a list of 26 facts about the borrowing firm and its industry, and make a loan analysis. They were then asked to make unexpected recall of the information 10 minutes later. Results provide support to the hypothesis when information consistency is defined relative to decisions whether to approve or deny loans, but not when it is related to assessments of the risk of nonpayment.

Psychological aspects, Memory, Commercial loans, Loan officers

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An examination of market efficiency: information order effects in a laboratory market

Article Abstract:

A study is conducted to determine whether market prices are affected by the sequence of information releases. It tests the descriptive validity of the efficient hypothesis, which proposes that markets seize new information rapidly and without prejudice to security prices, against the alternative hypothesis that systematic individual biases can persist in a market setting. A series of laboratory double auction experiments is conducted to investigate the possibility that the order effects observed in individual decision making may also be observed in asset pricing within a market. Findings provide evidence of a recency effect in the laboratory markets and suggest that market efficiency may only occur when the information reaching the market does not systematically bias individual judgement.

Economics, Financial markets, Information theory, Efficient market theory, Information theory in economics

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The effects of a modest incentive on information overload in an investment analysis task

Article Abstract:

Research presented concerns the impact of information overload on the decision-making processes of accountants. The model suggests that task performance will increase in the beginning as the individual receives more information; but if there is too much information for the decision-maker to be able to process, performance will decline.

United States, Financial Management, Statistical Data Included, Methods, Accountants, Investment analysis, Securities analysis

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