Information technologies may affect productivity by reducing agents’ information
processing costs, and by making agents private information easier to observe
by the principal. We distinguish these mechanisms empirically in the context of
the randomized adoption of credit scoring in a bank that lends primarily to small
businesses. We find that scores increase credit committees effort and output on
difficult-to-evaluate applications. Output also increases in a treatment where com-
mittees receive no new information about an applicant, but the score is expected
to become available in the future. This effect is uniquely consistent with scores
reducing asymmetric information problems inside credit committees. This agency
channel explains over 75% of the total output increase. Additional evidence sug-
gests that scores improve productive efficiency by decentralizing decision-making in
the organization.