Skrastins, J and Vig, V (2019) How organizational hierarchy affects information production. Review of Financial Studies, 32 (2). pp. 564-604. ISSN 0893-9454
Abstract
We exploit a variation in organizational hierarchy induced by a reorganization plan implemented in roughly 2,000 bank branches in India. We do so to investigate how organizational hierarchy affects the allocation of credit. We find that increased hierarchization of a branch induces credit rationing, reduces loan performance, and generates standardization in loan contracts. Additionally, we find that hierarchical structures perform better in environments characterized by a high degree of corruption, highlighting the benefits of hierarchies in restraining rent-seeking activities. Overall, our results are consistent with the view that valuable information may be lost in hierarchical structures.
More Details
Item Type: | Article |
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Subject Areas: | Finance |
Additional Information: |
Vikrant Vig gratefully acknowledges financial support from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation programme (grant agreement No. 679747). |
Funder Name: | European Research Council |
Date Deposited: | 30 May 2019 10:40 |
Date of first compliant deposit: | 18 Sep 2019 |
Subjects: |
Banks Microfinance Mortgages Organisational behaviour |
Last Modified: | 13 Oct 2024 01:42 |
URI: | https://lbsresearch.london.edu/id/eprint/993 |