Information Sharing and Information Acquisition in Credit Markets

Artashes Karapetyan and Bogdan Stacescu

Review of Finance, 2014, vol. 18, issue 4, 1583-1615

Abstract: We examine the effect of information sharing via credit bureaus or credit registers on banks’ incentives to collect information about their borrowers. Information asymmetries have been identified as an important source of bank profits, and sharing knowledge about borrowers can reduce those rents. Despite that, we show that banks’ incentives to collect information actually increase in the presence of information sharing. The reason is that when hard, standardized information is shared, banks’ incentives to invest in soft, nonverifiable information increase. The result can be more accurate lending decisions and improved welfare.

Date: 2014
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Related works:
Working Paper: Information sharing and information acquisition in credit markets (2010)
Working Paper: Information Sharing and Information Acqusition in Credit Markets (2009)
Working Paper: Information Sharing and Information Acqusition in Credit Markets (2009)
Working Paper: Information sharing and information acquisition in credit markets (2009)
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