IDEAS home Printed from https://ideas.repec.org/p/usg/sfwpfi/201612.html
   My bibliography  Save this paper

The Impact of Credit Information Sharing on Interest Rates

Author

Listed:
  • Gietzen, Thomas

    ()

Abstract

I study the impact of information sharing among banks on interest rates borrowers pay. To identify the effect of credit information sharing, I exploit a particular feature of the introduction of an Information sharing system in an African banking market. Banks started to Report borrowers to the new system more than a year before they began to actively use the data to screen applicants. Hence, this study is the first to directly control for compositional changes in the borrower pool by combining a control period during which no information was shared among banks with a loan-level data source that facilitates tracing borrowers who switch banks. Results lend great support to the idea that information sharing efficiently mitigates adverse selection problems. Successful repeated borrowers are able to obtain cheaper follow-up loans when information is actively shared among banks and borrowers who Switch institutions profit most from the reduction in adverse selection. At the same time, as banks loose their ability to hold-up successful borrowers for their second loan, first-time credit starts to be more expensive, even though this effect is strongly outweighed by the cost reduction for follow-up loans.

Suggested Citation

  • Gietzen, Thomas, 2016. "The Impact of Credit Information Sharing on Interest Rates," Working Papers on Finance 1612, University of St. Gallen, School of Finance.
  • Handle: RePEc:usg:sfwpfi:2016:12
    as

    Download full text from publisher

    File URL: http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1612.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, vol. 84(2), pages 299-329, May.
    3. Gehrig, Thomas & Stenbacka, Rune, 2007. "Information sharing and lending market competition with switching costs and poaching," European Economic Review, Elsevier, vol. 51(1), pages 77-99, January.
    4. Alberto Bennardo & Marco Pagano & Salvatore Piccolo, 2015. "Multiple Bank Lending, Creditor Rights, and Information Sharing," Review of Finance, European Finance Association, vol. 19(2), pages 519-570.
    5. 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.
    6. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Credit Information Sharing; Credit Registry; Interest Rates; Switching;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usg:sfwpfi:2016:12. 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: (Geraldine Frei). General contact details of provider: http://edirc.repec.org/data/cfisgch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.