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

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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. Umberto Filotto & Caterina Lucarelli & Nicoletta Marinelli, 2018. "Nudge of shared information responsibilities: a meso-economic perspective of the Italian consumer credit reform," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 17(1), pages 1-14, November.
    3. Camelia Minoiu, 2018. "Financial Access Under the Microscope," NCID Working Papers 05/2018, Navarra Center for International Development, University of Navarra.
    4. 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.
    5. 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.
    6. Gietzen, Thomas, 2017. "Credit Scoring vs. Expert Judgment – A Randomized Controlled Trial," Working Papers on Finance 1709, University of St. Gallen, School of Finance.
    7. Samuel Fosu & Albert Danso & Henry Agyei-Boapeah & Collins G. Ntim & Emmanuel Adegbite, 2020. "Credit information sharing and loan default in developing countries: the moderating effect of banking market concentration and national governance quality," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 55-103, July.

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    More about this item

    Keywords

    information sharing; credit market competition; hazard models;
    All these keywords.

    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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