How Organizational Hierarchy Affects Information Production

Autor: Vikrant Vig, Janis Skrastins
Jazyk: angličtina
Předmět:
Zdroj: The Review of Financial Studies
ISSN: 1465-7368
0893-9454
DOI: 10.1093/rfs/hhy071
Popis: This paper empirically investigates how organizational hierarchy affects the allocation of credit within a bank. Using an exogenous variation in organizational design, induced by a reorganization plan implemented in roughly 2,000 bank branches in India during 1999 - 2006, and employing a difference-in-differences research strategy, we find that increased hierarchization of a branch decreases its ability to produce "soft" information on loans, leads to increased standardization of loans and rationing of "soft information" loans. Furthermore, this loss of information brings about a reduction in performance on loans: delinquency rates and returns on similar loans are worse in more hierarchical branches. We also document how hierarchical structures perform better in environments that are characterized by a high degree of corruption, thus highlighting the benefits of hierarchical decision making in restraining rent seeking activities. Finally, we document a channel { managerial interference { through which hierarchy affects loan outcomes.
Databáze: OpenAIRE
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