The influences of conflicting information on novices and loan officers' actions

Abstract

When a decision maker takes action to predict a financial event, a distinction can be made between judgments about possible values for the event and decisions that a given prediction is correct. In this study an explanation is proposed for why conflicting information differently influences novices' from loan officers' actions. Sixty-seven MBA students and forty commercial lending officers were told to compare the importance of various information items in forming their decisions about whether a company should receive an unsecured US$1,000,000 line of credit for one year. An important finding of this study is that conflicting information is processed differently between novices and loan officers. Several differences between novices and loan officers' methods of processing information are discussed. This has future implications on how individuals may be trained to handle mixed signals. The conclusion section explains why these differences may occur when subject groups are analyzed in a model setting. The method of modeling is the Partial Least Square (PLS) technique. PLS provides a very important epistemic relation between theoretical and empirical variables. This method embodies two types of epistemic relations: reflective (cognitive processes) and formative (financial statement information), which are necessary to model decision makers' processes and management concepts, respectively.PsycINFO classification: 2240; 2340