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Information Sharing and Rating Manipulation

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  • Giannetti, Mariassunta
  • Liberti, Jose Maria
  • Sturgess, Jason

Abstract

We show that banks manipulate the credit ratings of their borrowers before being compelled to share them with competing banks. Using a unique feature on the timing of information disclosure of the Argentinean public credit registry, we disentangle the effect of manipulation from learning of credit ratings. We show that banks downgrade high quality borrowers on which they have positive private information to protect their informational rents. Banks also upgrade low quality borrowers to avoid creditor runs. Our results can explain the limited effectiveness of public credit registries and cast doubt on the use of credit ratings in reducing information asymmetry

Suggested Citation

  • Giannetti, Mariassunta & Liberti, Jose Maria & Sturgess, Jason, 2016. "Information Sharing and Rating Manipulation," CEPR Discussion Papers 11154, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11154
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. José María Liberti & Mitchell A. Petersen, 2018. "Information: Hard and Soft," NBER Working Papers 25075, National Bureau of Economic Research, Inc.
    3. José Liberti & Jason Sturgess & Andrew Sutherland, 2018. "Economics of Voluntary Information Sharing," Working Papers 869, Queen Mary University of London, School of Economics and Finance.
    4. Notheisen, Benedikt & Weinhardt, Christof, 2019. "The blockchain, plums, and lemons: Information asymmetries & transparency in decentralized markets," Working Paper Series in Economics 130, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    5. Darmouni, Olivier & Sutherland, Andrew, 2018. "Learning about Competitors: Evidence from SME Lending," MPRA Paper 93668, University Library of Munich, Germany.
    6. Thanassoulis, John, 2018. "The I.O. of ethics and cheating when consumers do not have rational expectations," CEPR Discussion Papers 13172, C.E.P.R. Discussion Papers.
    7. Theodora Bermpei & Antonios Nikolaos Kalyvas & Lorenzo Neri & Antonella Russo, 2019. "Will Strangers Help you Enter? The Effect of Foreign Bank Presence on New Firm Entry," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(1), pages 1-38, August.
    8. Sutherland, Andrew, 2018. "Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 123-141.

    More about this item

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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