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Sharing information in the credit market: Contract-level evidence from U.S. firms

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  • Doblas-Madrid, Antonio
  • Minetti, Raoul

Abstract

We investigate the impact of lenders' information sharing on firms' performance in the credit market using rich contract-level data from a U.S. credit bureau. The staggered entry of lenders into the bureau offers a natural experiment to identify the effect of lenders' improved access to information. Consistent with the predictions of Padilla and Pagano (1997, 2000) and Pagano and Jappelli (1993), we find that information sharing reduces contract delinquencies and defaults, especially when firms are informationally opaque. The results also reveal that information sharing does not reduce the use of guarantees, that is, it may not loosen lending standards.

Suggested Citation

  • Doblas-Madrid, Antonio & Minetti, Raoul, 2013. "Sharing information in the credit market: Contract-level evidence from U.S. firms," Journal of Financial Economics, Elsevier, vol. 109(1), pages 198-223.
  • Handle: RePEc:eee:jfinec:v:109:y:2013:i:1:p:198-223
    DOI: 10.1016/j.jfineco.2013.02.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Information asymmetries; Credit contracts; Credit bureaus;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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