Information Technology and Banking Organization
46 Pages Posted: 1 Sep 2010
Date Written: March 22, 2010
We investigate the impact of information and communication technologies (ICT) on local loan officers’ autonomy in small business lending. We derive a simple agency model of the interaction between a local branch manager and the headquarters, which yields an estimable equation for the optimal delegation of authority. Using a unique and specifically tailored dataset including about 300 Italian banks, we show that banks equipped with more ICT capital and resorting to credit scoring delegate more decision-making power to their local branch managers. These results are robust to many additional controls, including instrumental variable estimation. The effects on decentralization are strengthened for those banks that jointly hold higher ICT capital endowments and adopt credit scoring.
Keywords: ICT, Credit Scoring, Delegation, Banking Organization, Local Branch Manager, Small Business Lending
JEL Classification: L22, M54, O33
Suggested Citation: Suggested Citation