Sharing default information as a borrower discipline device
Creditors often share information about their customers' credit records. Besides helping them to spot bad risks, this acts as a disciplinary device. If creditors are known to inform one another of defaults, borrowers must consider that default on one lender would disrupt their credit rating with all the other lenders. This increases their incentive to perform. However, sharing more detailed information can reduce this disciplinary effect: borrowers' incentives to perform may be greater when lenders only disclose past defaults than when they 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.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sharpe, Steven A, 1990.
" Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships,"
Journal of Finance,
American Finance Association, vol. 45(4), pages 1069-87, September.
- Steven A. Sharpe, 1989. "Asymmetric information, bank lending, and implicit contracts: a stylized model of customer relationships," Finance and Economics Discussion Series 70, Board of Governors of the Federal Reserve System (U.S.).
- Pagano, Marco & Jappelli, Tullio, 1993.
" Information Sharing in Credit Markets,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1693-1718, December.
- Diamond, Douglas W, 1989.
"Reputation Acquisition in Debt Markets,"
Journal of Political Economy,
University of Chicago Press, vol. 97(4), pages 828-62, August.
- Milgrom, P. & Shannon, C., 1991.
"Monotone Comparative Statics,"
11, Stanford - Institute for Thoretical Economics.
- Padilla, Atilano Jorge & Pagano, Marco, 1996.
"Endogenous Communication Among Lenders and Entrepreneurial Incentives,"
CEPR Discussion Papers
1295, C.E.P.R. Discussion Papers.
- Padilla, A Jorge & Pagano, Marco, 1997. "Endogenous Communication among Lenders and Entrepreneurial Incentives," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 205-36.
- Padilla, A.J. & Pagano, M., 1994. "Endogenous Communication Among Lenders and Entrepreneurial Incentives," Papers 9407, Centro de Estudios Monetarios Y Financieros-.
- Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
- Vercammen, James A, 1995. "Credit Bureau Policy and Sustainable Reputation Effects in Credit Markets," Economica, London School of Economics and Political Science, vol. 62(248), pages 461-78, November.
- Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
- Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
- Lummer, Scott L. & McConnell, John J., 1989. "Further evidence on the bank lending process and the capital-market response to bank loan agreements," Journal of Financial Economics, Elsevier, vol. 25(1), pages 99-122, November.
- Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
- Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:44:y:2000:i:10:p:1951-1980. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.