Sharing Default Information as a Borrower Discipline Device

A. Jorge Padilla () and Marco Pagano
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A. Jorge Padilla: CEMFI and CEPR

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Creditors often share information about their customers' credit record. Besides helping them to spot bad risks, this informational exchange acts as a disciplinary device. If creditors are known to exchange data about defaults, borrowers must consider that default on a current lender would disrupt their credit rating with all the other lenders. This raises their incentive to perform. But sharing more detailed information can reduce this disciplinary effect: when lenders only disclose past defaults, borrowers' incentives to perform may be greater than when lenders share all their information. In some instances, by "fine-tuning" the type and accuracy of the information shared, lenders can raise borrowers' incentives to their first-best level.

Keywords: Fiscal policy; national saving; contractionary fiscal expansions (search for similar items in EconPapers)
JEL-codes: E21 E62 H31 (search for similar items in EconPapers)
Date: 1999-05-01
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (12)

Published in European Economic Review, 2000, vol. 44, pages 1951-80

Downloads: (external link)
http://www.csef.it/WP/wp21.pdf (application/pdf)

Related works:
Journal Article: Sharing default information as a borrower discipline device (2000)
Working Paper: Sharing Default Information as a Borrower Discipline Device (1999)
Working Paper: Sharing Default Information as a Borrower Discipline Device (1999)
Working Paper: Sharing Default Information as a Borrower Discipline Device (1996)
Working Paper: Sharing Default Information as a Borrower Discipline Device (1996)
Working Paper: Sharing Default Information as a Borrower Discipline Device (1994)
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