The Influence of Motivation, Lender Type, and Dark Triad Personality Characteristics on Loan Application Misrepresentations

This study reports the results of an experiment that examines borrowers’ propensity to misrepresent and misstate information in a hypothetical loan application. The study uses a 2 × 2 between-participants design where the manipulated variables are borrower motivation (selfish or altruistic) and lender type (a private lender or the federal government Paycheck Protection Program (PPP)). Participants’ dark triad characteristics were assessed and treated as a moderator. Participants were asked about their likelihood to misstate the company’s financial statements or misrepresent narrative information provided with their loan application. Participants reported a higher likelihood of misrepresenting narrative information on loan application under selfish (versus altruistic) motivation. They also reported higher likelihood of financial statement misstatement on loan applications to the government (versus private lender). This study sheds light on how the federal PPP may have influenced borrowers’ likelihood to misrepresent or misstate information on loan applications.