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Banking under Conflict: Managers and Organizational Design

Author

Listed:
  • Nicola Limodio

    (Bocconi University, Dept. of Finance, BAFFI and IGIER, and CEPR)

  • Luca Picariello

    (Univ. of Naples Federico II, Dept. of Econ. & Stat., CSEF, MoFiR)

  • Tom Schwantje

    (Bocconi University, Dept. of Finance, BAFFI and IGIER)

Abstract

How do organizations adapt internally when ethnic divisions intensify? We develop a model in which organizations jointly choose managerial appointments and delegation when locally matched managers have better information but are less aligned with headquarters, and test it using a panel of Ethiopian bank branches. Exploiting variation in banks' exposure to ethnic conflict across their branch networks, we find that conflict increases the appointment of locally matched managers, while reducing lending autonomy and leaving branch credit mostly unaffected. Conflict-exposed branches are more likely to be staffed by insiders reassigned within the bank. An LLM-based CEO vignette exercise corroborates this mechanism.

Suggested Citation

  • Nicola Limodio & Luca Picariello & Tom Schwantje, 2026. "Banking under Conflict: Managers and Organizational Design," Mo.Fi.R. Working Papers 198, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    • Handle: RePEc:anc:wmofir:198
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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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