Information Technology and Banking Organization

Banks, Local Credit Markets and Credit Supply Conference, p. 49, 2010

27 Pages Posted: 31 Jul 2012

Multiple version iconThere are 2 versions of this paper

Date Written: March 24, 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.

Suggested Citation

Mocetti, Sauro and Sette, Enrico and Pagnini, Marcello, Information Technology and Banking Organization (March 24, 2010). Banks, Local Credit Markets and Credit Supply Conference, p. 49, 2010. Available at SSRN: https://ssrn.com/abstract=2120727 or http://dx.doi.org/10.2139/ssrn.2120727

Sauro Mocetti (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Enrico Sette

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Marcello Pagnini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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