The Effects of Creditor Rights and Bank Information Sharing on Borrower Behavior: Theory and Evidence

Hendrik Hakenes, John H. Boyd and Amanda Rae Heitz

No 11699, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper provides a comprehensive theoretical and empirical analysis of "creditor rights" and "information sharing" throughout over 1.8 million public and private firms in Europe. We show that many of the outcomes associated with greater levels of creditor rights can be obtained with higher information sharing between banks. Both theory and empirics show that creditor rights and information sharing are associated with greater firm leverage, lower profitability, as well as greater distance to default. Moreover, both theory and empirics find that creditor rights and information sharing are robust substitutes. Our analysis suggests that poor creditor rights, which tend to be sticky over time, can be substituted by improved information sharing.

Keywords: Creditor rights; Information sharing (search for similar items in EconPapers)
JEL-codes: G21 G28 L15 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-ban
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