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Making Loan Decisions in Banks: Straight from the Gut?

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  • Fiona Wilson

    (University of Glasgow)

Abstract

When a business owner approaches a bank for a loan for their business they might hope that a well-established bureaucratic procedure would ensure that their application was processed with stipulated rules and impersonal criteria. They might expect that two bank officials, evaluating the same proposal for a loan, would reach the same decision. However, research shows that both quantifiable data and “gut feelings” are used in the decision. In this research, analysis of interviews with senior managers, and both individual and focus group interviews with bank loan officers, reveals that there are no set criteria or stipulated rules. The interviews demonstrate how and why nonquantifiable data is used, and why different bank officials can reach different conclusions on the same loan proposal. While these bank loan officers do not appear to be discriminatory against female business owners, the lending criteria and process allows significant room for discrimination. It appears questionable whether bank lending is seen as an ethical and fair process.

Suggested Citation

  • Fiona Wilson, 2016. "Making Loan Decisions in Banks: Straight from the Gut?," Journal of Business Ethics, Springer, vol. 137(1), pages 53-63, August.
    • Handle: RePEc:kap:jbuset:v:137:y:2016:i:1:d:10.1007_s10551-014-2515-y
    DOI: 10.1007/s10551-014-2515-y
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    References listed on IDEAS

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    3. Amanda Bullough & Ulrike Guelich & Tatiana S. Manolova & Leon Schjoedt, 2022. "Women’s entrepreneurship and culture: gender role expectations and identities, societal culture, and the entrepreneurial environment," Small Business Economics, Springer, vol. 58(2), pages 985-996, February.
    4. Jialin Du & Eric Yanfei Zhao, 2023. "International expansion and home-country resource acquisition: A signaling perspective of emerging-market firms’ internationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(9), pages 1642-1660, December.
    5. Chen, Jingyuan & Calabrese, Raffaella & Cowling, Marc, 2024. "Does energy efficiency of UK SMEs affect their access to finance?," Energy Economics, Elsevier, vol. 129(C).
    6. Luca Pistilli & Alessia Paccagnini & Stefano Breschi & Franco Malerba, 2023. "Gender Bias in Entrepreneurship: What is the Role of the Founders’ Entrepreneurial Background?," Journal of Business Ethics, Springer, vol. 187(2), pages 325-346, October.

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