Sharing credit information under endogenous costs

Eric Van Tassel ()

No 9004, Working Papers from Department of Economics, College of Business, Florida Atlantic University

Abstract: In this paper we study a model in which asymmetrically informed banks compete with one another to offer loans to entrepreneurs with risky projects. Banks are given an opportunity to share private credit information about their borrowers. The revealed information impacts both the bank’s repayment revenue as well as its costs, in terms of either the rate paid on debt and insurance, or the risk adjusted capital requirement. In this framework, we study how the interaction of repayment revenue and cost shape individual banks’ incentives to share information and in turn, how this explains the overall degree of information sharing in the economy.

Keywords: Information sharing; Bank competition; Market discipline (search for similar items in EconPapers)
JEL-codes: D82 G21 O16 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-06
New Economics Papers: this item is included in nep-ban and nep-cta
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