Mandatory Bank Disclosures and Credit Access

52 Pages Posted: 27 Apr 2017  

Karthik Balakrishnan

London Business School

Aytekin Ertan

London Business School

Date Written: April 24, 2017

Abstract

This paper examines whether and how mandated bank disclosures affect the supply of credit to the real economy. We exploit the ECB Loan-Level Reporting Initiative as a shock to bank disclosures, and use survey data on European small businesses to identify credit supply. We find that in regimes with heightened mandated bank disclosures, borrowers 1) receive greater funding, conditional on applying for a bank loan, 2) are less likely to be discouraged from applying for financing, and 3) are more optimistic about future credit access. Treatment banks raise more capital post-transparency, and our results are stronger for systems in which bank balance sheets are illiquid, consistent with transparency alleviating the capital market frictions banks face. We also find that companies whose relationship banks provide loan-level disclosures, borrow, invest, and hire more, relative to other borrowers in the same country and industry.

Keywords: Mandatory Disclosure, Transparency, Credit Access, Lending, Real Effects

JEL Classification: G21, G28, G32, M41, M48

Suggested Citation

Balakrishnan, Karthik and Ertan, Aytekin, Mandatory Bank Disclosures and Credit Access (April 24, 2017). Available at SSRN: https://ssrn.com/abstract=2959077 or http://dx.doi.org/10.2139/ssrn.2959077

Karthik Balakrishnan

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

Aytekin Ertan (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
442070008131 (Phone)

Paper statistics

Downloads
53
Rank
316,112
Abstract Views
146