Information Sharing and Information Acquisition in Credit Markets

Review of Finance, Forthcoming

European Banking Center Discussion Paper No. 2009-07S

CentER Discussion Paper Series No. 2009-36S

Posted: 19 Sep 2008 Last revised: 12 Mar 2014

See all articles by Artashes Karapetyan

Artashes Karapetyan

ESSEC Business School

Bogdan Stacescu

BI Norwegian Business School

Date Written: August 17, 2008

Abstract

Credit bureaus and public credit registers allow lenders to share information about borrowers. Since information asymmetries have been identified as an important source of bank profits, it may seem that the establishment of such arrangements will lead to lower investment in information acquired through screening and monitoring. However, banks base their decisions on both hard and soft information, and it is only the former type of data that can be communicated via credit bureaus. We show that when hard information is shared, banks are likely to invest more in soft information, whether through initial screening or through monitoring during the life of the loan. This can potentially lead to more accurate lending decisions and favor small, informationally opaque borrowers.

Keywords: hard information, soft information, information sharing, credit bureau

JEL Classification: G21, L13

Suggested Citation

Karapetyan, Artashes and Stacescu, Bogdan, Information Sharing and Information Acquisition in Credit Markets (August 17, 2008). Review of Finance, Forthcoming, European Banking Center Discussion Paper No. 2009-07S, CentER Discussion Paper Series No. 2009-36S, Available at SSRN: https://ssrn.com/abstract=1269344 or http://dx.doi.org/10.2139/ssrn.1269344

Artashes Karapetyan (Contact Author)

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

Bogdan Stacescu

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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