Does Credit Reporting Lead to a Decline in Relationship Lending? Evidence from Information Sharing Technology

Andrew Sutherland

MPRA Paper from University Library of Munich, Germany

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 D83 G21 G23 G30 G32 M41 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-ict and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Published in Journal of Accounting and Economics 66.1(2018): pp. 123-141

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Journal Article: 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:pra:mprapa:93670

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