Uncertainty and culture in bank loan decisions

Simulations of loan applications were evaluated by senior bank executives in terms of their prospects for approval and risk to determine the influence of organizational culture and payback uncertainty on loan decisions. The influence of the participating banker's decision style, based on the Jungian typology, was also determined. Eight simulated loans were constructed that had four types of cultures and high or low uncertainty in pay back prospects. Evaluations of the ratings of these loans found that culture was a more important determinant of loan approval and risk assessment than either uncertainty or the banker's personal decision style. Bankers in an analytic culture were inclined to approve loans. In a consultative or speculative culture bankers were more apprehensive but would make these same loans. In a charismatic culture bankers were unsure about the advisability of making the same loans. The implications of these findings for improved practice in bank loan decision making are discussed.