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Information technology and banking organization

Author

Listed:
  • Sauro Mocetti

    (Bank of Italy)

  • Marcello Pagnini

    (Bank of Italy)

  • Enrico Sette

    (Bank of Italy)

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

  • Sauro Mocetti & Marcello Pagnini & Enrico Sette, 2010. "Information technology and banking organization," Temi di discussione (Economic working papers) 752, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_752_10
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    More about this item

    Keywords

    ICT; credit scoring; delegation; banking organization; local branch manager; small business lending;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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