The Effect of Behavioral Biases on Banking Credit Decision رسالة دكتوراة

Abstract

This study investigates the effect of behavioral biases on banking credit decisions, focusing on both cognitive and emotional biases. The cognitive biases examined include overconfidence, representativeness, anchoring and adjustment, cognitive dissonance, availability, self-attribution, illusion of control, conservatism, ambiguity aversion, mental accounting, confirmation, hindsight, recency, and framing biases, while the emotional biases include endowment, self control, optimism, loss aversion, regret aversion, and status quo biases. This study uses a quantitative approach; relies on secondary data from academic literature and primary data collected through a survey questionnaire administered to credit officers, credit analysts, credit managers, and branch managers across the Palestinian commercial banks, through simple random sampling. The results show that banking credit decisions are significantly influenced by overconfidence and self-attribution, anchoring, illusion of control, availability, conservatism, and the overall behavioral bias index, as their significance levels were below 0.05. Hindsight bias was the only cognitive bias found to have no effect, while representativeness, endowment effect, optimism, status quo, self-control, mental accounting, regret aversion, loss aversion, and ambiguity aversion biases also showed no significant impact, with significance levels above 0.05.