The Emergence of Information Sharing in Credit Markets

46 Pages Posted: 15 Jan 2009

See all articles by Martin Brown

Martin Brown

University of St. Gallen

Christian Zehnder

University of Lausanne

Multiple version iconThere are 2 versions of this paper

Date Written: January, 14 2009

Abstract

We provide the first systematic empirical analysis of how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones. Lenders may, however, also lose market power by sharing information with competitors. Our results suggest that asymmetric information in the credit market increases the frequency of information sharing between lenders significantly. Stronger competition between lenders reduces information sharing. In credit markets where lenders may fail to coordinate on sharing information, the degree of information asymmetry, rather than lender competition, drives actual information sharing behavior.

Keywords: Information Sharing, Credit Market, Competition, Adverse Selection, Experiment

JEL Classification: G21, G28, D82, O16

Suggested Citation

Brown, Martin and Zehnder, Christian, The Emergence of Information Sharing in Credit Markets (January, 14 2009). Available at SSRN: https://ssrn.com/abstract=1327834 or http://dx.doi.org/10.2139/ssrn.1327834

Martin Brown (Contact Author)

University of St. Gallen ( email )

Unterer Graben 21
St. Gallen, CH-9000
Switzerland

Christian Zehnder

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

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