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Show me Yours and I'll Show you Mine : Sharing Borrower Information in a Competitive Credit Market

Author

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  • de Haas, R.T.A.

    (Tilburg University, Center For Economic Research)

  • Bos, J.
  • Millone, Matteo

Abstract

We exploit detailed data on approved and rejected small business loans to assess the impact of the introduction of a credit registry in Bosnia and Herzegovina. Our findings are threefold. First, mandatory information sharing tightens lending at the extensive margin as more applications are rejected, in particular in areas with strong credit market competition. These rejections are increasingly based on hard information—especially positive borrower information from the new registry—and less on soft information. Second, lending standards also tighten at the intensive margin: the registry leads to smaller, shorter and more expensive loans. Third, the tightening of lending along both margins improves loan quality. Default rates go down in particular in high competition areas and for first-time borrowers. This suggests that a reduction in adverse selection is an important channel through which information sharing affects loan quality.
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Suggested Citation

  • de Haas, R.T.A. & Bos, J. & Millone, Matteo, 2015. "Show me Yours and I'll Show you Mine : Sharing Borrower Information in a Competitive Credit Market," Discussion Paper 2015-027, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:2e27a9e9-2d06-48ea-ae43-5be37f62d314
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    References listed on IDEAS

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    Cited by:

    1. Gietzen, Thomas, 2016. "The Impact of Credit Information Sharing on Interest Rates," Working Papers on Finance 1612, University of St. Gallen, School of Finance.
    2. 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.
    3. Camelia Minoiu, 2018. "Financial Access Under the Microscope," NCID Working Papers 05/2018, Navarra Center for International Development, University of Navarra.

    More about this item

    Keywords

    information sharing; credit market competition; hazard models;

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • 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
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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