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Authority and Soft Information Production within a Bank Organization

Author

Listed:
  • Masazumi Hattori

    (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: masazumi.hattori@boj.or.jp))

  • Kohei Shintani

    (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: kouhei.shintani@boj.or.jp))

  • Hirofumi Uchida

    (Professor, Graduate School of Business Administration, Kobe University (E-mail: uchida@b.kobe-u.ac.jp))

Abstract

We ask three questions to clarify the production of soft information and decision making within a bank organization: (1) In a hierarchical ladder within a bank organization, who has more soft information on borrowers (repository of soft information) and does the answer differ depending on bank- and/or firm-specific factors?; (2) In the hierarchical ladder, who makes a decision to grant loans (decision maker) and does the answer have bank- and/or firm-specificity?; (3) Does the authority distance between the repository of soft information and the decision maker reduce the benefit from the bank-firm relationship? Our empirical findings are the following: (1) Branch managers rather than loan officers have sufficient soft information on borrowers, and the repository is located at a higher level in the hierarchy for smaller banks; (2) Branch managers and executives in the headquarters have decision-making authority, but more authority is delegated at a lower level in the hierarchy for larger banks; and (3) A greater authority distance is harmful for borrowers because it invites more financial constraints.

Suggested Citation

  • Masazumi Hattori & Kohei Shintani & Hirofumi Uchida, 2012. "Authority and Soft Information Production within a Bank Organization," IMES Discussion Paper Series 12-E-07, Institute for Monetary and Economic Studies, Bank of Japan.
  • Handle: RePEc:ime:imedps:12-e-07
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    References listed on IDEAS

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    More about this item

    Keywords

    Authority; Soft information; Organizational structure; Banks;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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