Multiple-Bank Lending, Creditor Rights and Information Sharing

Alberto Bennardo (), Marco Pagano and Salvatore Piccolo ()

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

Abstract: Multiple bank lending creates an incentive to overborrow and default. When creditor rights are poorly protected and collateral value is volatile, this incentive leads to rationing and non-competitive interest rates. If banks share information about past debts via credit reporting systems, the incentive to overborrow is mitigated: interest and default rates decrease; credit access improves if the value of collateral is not very volatile, but worsens otherwise. If credit reporting also allows banks to condition loans on clients’ subsequent debts, rationing disappears and interest rates drop to the competitive level. These predictions square with the findings of recent empirical studies.

Keywords: multiple-bank lending; rationing; information sharing; common agency. (search for similar items in EconPapers)
JEL-codes: D73 K21 K42 L51 (search for similar items in EconPapers)
Date: 2008-12-31, Revised 2010-07-28
New Economics Papers: this item is included in nep-ban, nep-cta, nep-law and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Published in Review of Finance, 2015, 19(2), pp. 519–5702.

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Related works:
Journal Article: Multiple Bank Lending, Creditor Rights, and Information Sharing (2015)
Working Paper: Multiple-Bank Lending, Creditor Rights and Information Sharing (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:211

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