Production of Information in the Credit Market: Evidence From a Public Intervention

55 Pages Posted: 20 Nov 2017 Last revised: 10 Dec 2019

See all articles by Christophe Cahn

Christophe Cahn

Banque de France - Direction des Entreprises

Mattia Girotti

Banque de France

Federica Salvadè

PSB Paris School of Business

Date Written: December 10, 2019

Abstract

We study how corporate credit ratings produced by a central bank and available to banks influence credit allocation. We exploit a refinement of this rating information, which makes some firms receive a positive rating surprise and discloses the central bank's private information on borrowers. We show that affected firms enjoy greater and cheaper access to bank credit, especially when they are informationally opaque and lenders are less informed. Furthermore, firms receiving the rating surprise start new bank relationships more easily and invest more. We conclude that these ratings reduce information asymmetries, and improve the functioning of the credit market.

Keywords: Information Sharing, Public Credit Rating Agency, Banks, Corporate Financing

JEL Classification: G21, G28, G32

Suggested Citation

Cahn, Christophe and Girotti, Mattia and Salvadè, Federica, Production of Information in the Credit Market: Evidence From a Public Intervention (December 10, 2019). Available at SSRN: https://ssrn.com/abstract=3072891 or http://dx.doi.org/10.2139/ssrn.3072891

Christophe Cahn

Banque de France - Direction des Entreprises ( email )

39 rue Croix des Petits Champs
Paris Cedex 01 75049
France

Mattia Girotti (Contact Author)

Banque de France ( email )

Paris
France

Federica Salvadè

PSB Paris School of Business ( email )

59 rue Nationale
Paris, 75013
France

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