Information Technology and Banking Organization

46 Pages Posted: 1 Sep 2010

Multiple version iconThere are 2 versions of this paper

Date Written: March 22, 2010

Abstract

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

Mocetti, Sauro and Pagnini, Marcello and Sette, Enrico, Information Technology and Banking Organization (March 22, 2010). Bank of Italy Temi di Discussione (Working Paper) No. 752. Available at SSRN: https://ssrn.com/abstract=1670094 or http://dx.doi.org/10.2139/ssrn.1670094

Sauro Mocetti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Marcello Pagnini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Enrico Sette (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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