NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Incentive Effect of IT: Randomized Evidence from Credit Committees

Daniel Paravisini, Antoinette Schoar

NBER Working Paper No. 19303
Issued in August 2013
NBER Program(s):   CF   DEV   IO   PR

We distinguish the impact of information technology adoption on information processing costs and agency costs by conducting a randomized control trial with a bank that adopts a new credit-scoring tool. The availability of scores significantly increases credit committees' effort and output on difficult- to-evaluate loan applications. Output increases almost as much in a treatment where the committee receives no new information, but anticipates the score becoming available after it evaluates an application, which suggests that scores reduce incentive problems inside the credit committee. We also show that scores improve efficiency by decentralizing decision-making and equalizing marginal returns across loans.

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This paper was revised on November 6, 2013

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19303

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