How organizational hierarchy affects information production

Skrastins, J and Vig, V (2019) How organizational hierarchy affects information production. Review of Financial Studies, 32 (2). pp. 564-604. ISSN 0893-9454 OPEN ACCESS


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.

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Item Type: Article
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
Organisational behaviour
Last Modified: 17 Jul 2024 01:47

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