Sharing Default Information as a Borrower Discipline Device
Creditors often share their information about their customers' credit record, directly or via information brokers such as credit bureaus and rating agencies. 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 disciplinary effect of information sharing can reduce the average default rate and increase the efficiency of the credit market, and it invariably sharpens competition between banks. But more detailed and extensive information sharing is not necessarily better: we show that the efficiency gains obtained obtained by pooling only data about past defaults can exceed those entailed by sharing all the information possesed by lenders.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Jan 1994|
|Date of revision:|
|Contact details of provider:|| Phone: 44 - 20 - 7183 8801|
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- 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.
- 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-.
- Padilla, Atilano Jorge & Pagano, Marco, 1996. "Endogenous Communication Among Lenders and Entrepreneurial Incentives," CEPR Discussion Papers 1295, C.E.P.R. Discussion Papers.
- Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
- 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.).
- 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.
- 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.
- Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
- 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, Paul & Shannon, Chris, 1994.
"Monotone Comparative Statics,"
Econometric Society, vol. 62(1), pages 157-80, January.
- Pagano, Marco & Jappelli, Tullio, 1993.
" Information Sharing in Credit Markets,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1693-1718, December.
- Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
- Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprfm:0043. 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: ()
If references are entirely missing, you can add them using this form.