Does information sharing reduce the role of collateral as a screening device?

Artashes Karapetyan and Bogdan Stacescu
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Artashes Karapetyan: Norges Bank (Central Bank of Norway)

No 2012/19, Working Paper from Norges Bank

Abstract: Information sharing and collateral reduce adverse selection costs, but are costly for lenders. When a bank learns more about the types of its rival's borrowers through information sharing (e.g., credit bureaus), it might seem that this information should substitute the role of collateral in screening their types. We instead show that information sharing may increase, rather than decrease, the role of collateral, which can be required in loans to high-risk borrowers in cases when it is not in the absence of information sharing. We extend to show that ex ante screening can substitute both collateral and information sharing.

Keywords: Bank competition; Information sharing; Collateral (search for similar items in EconPapers)
JEL-codes: G21 L13 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2012-12-18
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-cta and nep-mic
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Citations: View citations in EconPapers (9)

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https://www.norges-bank.no/en/news-events/news-pub ... pers/2012/WP-201219/

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Journal Article: Does information sharing reduce the role of collateral as a screening device? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2012_19

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