Economics of Voluntary Information Sharing
55 Pages Posted: 14 Nov 2017 Last revised: 21 Apr 2020
Date Written: August 31, 2018
We examine how developments in financial technology that improve information sharing affect lender specialization. Using the introduction of a U.S. commercial credit bureau, we document that lenders leverage their collateral expertise to enter new markets after joining. We exploit the staggered joining of members to show that a member lender’s exposure responds to information shared by new lenders entering the bureau but only when the newly shared information is related to the lender’s own specialization. Small lenders account for most of geographic expansion, while large lenders increase their exposure to small firms. Our results help explain why intermediaries regularly forego rents when voluntarily sharing information and show how financial technology that mitigates information asymmetries can shape the boundaries of lending.
Keywords: information sharing, fintech, specialization, financial intermediation, collateral, credit bureaus, credit scores
JEL Classification: G21, G32
Suggested Citation: Suggested Citation