Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology

Andrew Sutherland

Journal of Accounting and Economics, 2018, vol. 66, issue 1, 123-141

Abstract: I examine how credit reporting affects where firms access credit and how lenders contract with them. I use within firm-time and lender-time tests that exploit lenders joining a credit bureau and sharing information in a staggered pattern. I find information sharing reduces relationship-switching costs, particularly for firms that are young, small, or have had no defaults. After sharing, lenders transition away from relationship contracting, in two ways: contract maturities in new relationships are shorter, and lenders are less willing to provide financing to their delinquent borrowers. My results highlight the mixed effects of transparency-improving financial technologies on credit availability.

Keywords: Debt contracts; Information sharing; Information asymmetries; Hard and soft information; Credit bureaus; Relationship lending; Transactional lending; Information economics; Entrepreneurial finance; Credit reports; Credit scores; FinTech (search for similar items in EconPapers)
JEL-codes: D82 G21 G23 G30 G32 M41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

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Working Paper: Does Credit Reporting Lead to a Decline in Relationship Lending? Evidence from Information Sharing Technology (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:66:y:2018:i:1:p:123-141

DOI: 10.1016/j.jacceco.2018.03.002

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