52 Pages Posted: 27 Apr 2017
Date Written: April 24, 2017
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: Suggested Citation