Initiative, incentives, and soft information

José María Liberti*

*Corresponding author for this work

Research output: Contribution to journalReview article

10 Scopus citations

Abstract

This paper examines how organizational form a ects incentives inside a financial institution. Using unique organization-level data, I exploit a change to the hierarchical organization to test whether delegation of authority and reduction of oversight improve the provision of effort by loan officers. I find that empowering loan officers increases their effort in producing and using soft information in their lending decisions. Consistent with the incentive view of delegation, loan officers who receive more authority rely more on soft information relative to hard information in their decisions than those for whom authority is only partially or not delegated. The results shed light on the importance of organizational design for the production and use of soft information in financial institutions.

Original languageEnglish (US)
Pages (from-to)3714-3734
Number of pages21
JournalManagement Science
Volume64
Issue number8
DOIs
StatePublished - Aug 2018

Keywords

  • Delegation
  • Formal and real authority
  • Incentives
  • Soft information

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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