Information Sharing and Information Acquisition in Credit Markets

Review of Finance, Forthcoming

Norges Bank Working Paper 2010/24

Posted: 9 Jan 2011 Last revised: 17 Jun 2013

See all articles by Artashes Karapetyan

Artashes Karapetyan

ESSEC Business School

Bogdan Stacescu

BI Norwegian Business School

Date Written: November 22, 2010

Abstract

Since information asymmetries have been identified as an important source of bank profits, it may seem that the establishment of information sharing (e.g., introducing credit bureaus or public registers) will lead to lower investment in acquiring information. However, banks base their decisions on both hard and soft information, and it is only the former type of data that can be communicated credibly. We show that when hard information is shared, banks will invest more in soft information. These will produce more accurate lending decisions, provide higher welfare, lead to an increased focus on relationship banking and favor informationally opaque borrowers. We test our theory using a large sample of firm-level data from 24 countries.

Keywords: Bank competition, information sharing, relationship bank, hard, soft

JEL Classification: G21, L13

Suggested Citation

Karapetyan, Artashes and Stacescu, Bogdan, Information Sharing and Information Acquisition in Credit Markets (November 22, 2010). Review of Finance, Forthcoming, Norges Bank Working Paper 2010/24 , Available at SSRN: https://ssrn.com/abstract=1735392 or http://dx.doi.org/10.2139/ssrn.1735392

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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