Sharing Default Information as a Borrower Discipline Device
AbstractCreditors often share information about their customers' credit record. Besides helping them to spot bad risks, this informational exchange acts as a disciplinary device. If creditors are known to exchange data about defaults, borrowers must consider that default on a current lender would disrupt their credit rating with all the other lenders. This raises their incentive to perform. But sharing more detailed information can reduce this disciplinary effect: when lenders only disclose past defaults, borrowers' incentives to perform may be greater than when lenders share all their information. In some instances, by "fine-tuning" the type and accuracy of the information shared, lenders can raise borrowers' incentives to their first-best level.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 21.
Date of creation: 01 May 1999
Date of revision:
Publication status: Published in European Economic Review, 2000, vol. 44, pages 1951-80
Fiscal policy; national saving; contractionary fiscal expansions;
Other versions of this item:
- Padilla, A. Jorge & Pagano, Marco, 2000. "Sharing default information as a borrower discipline device," European Economic Review, Elsevier, vol. 44(10), pages 1951-1980, December.
- Padilla, A.J. & Pagano, M., 1996. "Sharing Default Information as a Borrower Discipline Device," Papers 73, Boston University - Industry Studies Programme.
- A Jorge Padilla & Marco Pagano, 1994. "Sharing Default Information as a Borrower Discipline Device," CEPR Financial Markets Paper 0043, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ.
- Padilla, A.J. & Pagano, M., 1999. "Sharing Default Information as a Borrower Discipline Device," Papers 9911, Centro de Estudios Monetarios Y Financieros-.
- A. Jorge Padilla & Marco Pagano, 1996. "Sharing Default Information as a Borrower Discipline Device," Papers 0073, Boston University - Industry Studies Programme.
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
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