Commercial and local banks have different organizational structures. Commercial banks have relatively hierarchical structures but local banks have relatively decentralized structures. Because of different organizational structures, they have different preferences for information. This paper tested hypothesis that hierarchical organizations prefer documented information to non-documented information and decentralized organizations prefer non-documented information to documented information. Furthermore, different organizational structures imply different investment patterns and allocate different capital assets which means small business lending in this paper. Commercial banks invest less in small business lending than local banks because of information preferences. This paper empirically shows that the difference in organizational structures is strongly correlated with small business lending in commercial and local banks in Korea.
