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AN ANALYSIS OF INFORMATIONAL RESTRICTIONS ON THE LENDING DECISIONS OF FINANCIAL INSTITUTIONS
Author(s) -
BARTH JAMES R.,
CORDES JOSEPH J.,
YEZER ANTHONY M. J.
Publication year - 1983
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1983.tb00637.x
Subject(s) - order (exchange) , economics , actuarial science , econometrics , business , finance
Lenders are assumed to use formal credit scoring schemes in order to evaluate borrower credit worthiness. Variables used in these schemes may be measured with error resulting in credit scores which include the effects of biased parameter estimates, and in lending decisions that appear to be discriminatory although lenders are not prejudiced. Regulations which restrict the information used in credit scoring schemes may produce undesirable credit supply results. Theoretical models are supplemented with illustrative empirical analysis of mortgage lending in which use of information on property location is prohibited. The empirical results indicate that the quantitative impact of such regulations is modest.