Do Relationships Matter? Evidence from Loan Officer Turnover
Author(s)Drexler, Alejandro; Schoar, Antoinette
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We show that the cost of employee turnover in firms that rely on decentralized knowledge and personal relationships depends on the firms' planning horizons and the departing employees' incentives to transfer information. Using exogenous shocks to the relationship between borrowers and loan officers, we document that borrowers whose loan officers are on leave are less likely to receive new loans from the bank, are more likely to apply for credit from other banks, and are more likely to miss payments or go into default. These costs are smaller when turnover is expected, as in the case of maternity leave, or when loan officers have incentives to transfer information, as in the case of voluntary resignations.
DepartmentSloan School of Management
Institute for Operations Research and the Management Sciences (INFORMS)
Drexler, Alejandro, and Antoinette Schoar. “Do Relationships Matter? Evidence from Loan Officer Turnover.” Management Science (August 2014).
Author's final manuscript