In this paper, logistic regression models containing random effects are explored as a means of simulating the decision process of commercial loan officers. Empirical Bayes estimates, determined with the EM Algorithm, are calculated for the random parameters. Analysis of data from a major...

Commercial loans are a major source of financing for small businesses. To enhance the likelihood of obtaining a commercial loan with the most favorable terms, sufficient information must be made available to the bank loan officer (BLO). Based on a review of the banking literature and a study of...