Influence of behavioural biases and personal factors on credit decision- making: Should the banks be concerned?

Abstract

This study investigates the impact of behavioural biases and some human factors on the decision-making of bank credit managers in the Greater Accra Region of Ghana. It uses partial least squares and independent samples t-test methods to examine the impact of psychological biases and personal factors on bank credit decision-making. Except for the level of education of loan applicants, the study found a positive and significant influence of all explanatory variables on bank creditdecision-making. Furthermore, the results suggest that female credit managers are more risk-averse than their male counterparts. However, the study found no significant difference between overconfidence of male and female credit managers. One area that has been ignored by previous studies is the influence of psychological biases on bank credit decision-making, especially in an emerging economy such as Ghana. To the best of our knowledge, this study is the first to examine the impact of psychological biases on bank credit decision-making in Ghana. The findings are likely to enhance the decision-making of bank credit managers, particularly in Ghana. Going forward, measures aimed at educating bank credit managers on the effect of psychological biases and human factors on credit decisions are recommended.