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Information sharing and information acquisition in credit markets

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  • Artashes Karapetyan

    () (Norges Bank (Central Bank of Norway))

  • Bogdan Stacescu

    () (Norwegian School of Management (BI))

Abstract

Since information asymmetries have been identified as an important source of bank profits, it may seem that the establishment of information sharing (e.g., introducing credit bureaus or public registers) will lead to lower investment in acquiring information. However, banks base their decisions on both hard and soft information, and it is only the former type of data that can be communicated credibly. We show that when hard information is shared, banks will invest more in soft information. These will produce more accurate lending decisions, provide higher welfare, lead to an increased focus on relationship banking and favor informationally opaque borrowers. We test our theory using a large sample of firm-level data from 24 countries.

Suggested Citation

  • Artashes Karapetyan & Bogdan Stacescu, 2010. "Information sharing and information acquisition in credit markets," Working Paper 2010/24, Norges Bank.
  • Handle: RePEc:bno:worpap:2010_24
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    Cited by:

    1. Boateng, Agyenim & Asongu, Simplice & Akamavi, Raphael & Tchamyou, Vanessa, 2018. "Information asymmetry and market power in the African banking industry," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 69-83.
    2. Gietzen, Thomas, 2016. "The Impact of Credit Information Sharing on Interest Rates," Working Papers on Finance 1612, University of St. Gallen, School of Finance.
    3. Dierkes, Maik & Erner, Carsten & Langer, Thomas & Norden, Lars, 2013. "Business credit information sharing and default risk of private firms," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2867-2878.
    4. Artashes Karapetyan & Bogdan Stacescu, 2014. "Information Sharing and Information Acquisition in Credit Markets," Review of Finance, European Finance Association, vol. 18(4), pages 1583-1615.
    5. Giorgio Albareto & Roberto Felici & Enrico Sette, 2016. "Does credit scoring improve the selection of borrowers and credit quality?," Temi di discussione (Economic working papers) 1090, Bank of Italy, Economic Research and International Relations Area.
    6. Asongu, Simplice A & Odhiambo, Nicholas M., 2018. "Information asymmetry, financialisation and financial access," Working Papers 23931, University of South Africa, Department of Economics.
    7. repec:spr:binfse:v:59:y:2017:i:6:d:10.1007_s12599-017-0499-8 is not listed on IDEAS
    8. Kalyvas, Antonios Nikolaos & Mamatzakis, Emmanuel, 2017. "Do creditor rights and information sharing affect the performance of foreign banks?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 13-35.
    9. Laptieva, Nataliia, 2016. "Information sharing and the volume of private credit in transition: Evidence from Ukrainian bank-level panel dataAuthor-Name: Grajzl, Peter," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 434-449.
    10. repec:eee:jfinec:v:127:y:2018:i:1:p:174-196 is not listed on IDEAS
    11. Beck, Thorsten & Degryse, Hans & De Haas, Ralph & van Horen, Neeltje, 2018. "When arm's length is too far: Relationship banking over the credit cycle," Journal of Financial Economics, Elsevier, vol. 127(1), pages 174-196.
    12. repec:bla:ecnote:v:46:y:2017:i:2:p:329-380 is not listed on IDEAS
    13. Diana Bonfim & Gil Nogueira & Steven Ongena, 2016. "Sorry, We're Closed: Loan Conditions When Bank Branches Close and Firms Transfer to Another Bank," Working Papers w201607, Banco de Portugal, Economics and Research Department.

    More about this item

    Keywords

    Bank competition; information sharing; relationship bank; hard; soft;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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