How Voluntary Information Sharing Systems Form: Evidence from a U.S. Commercial Credit Bureau

57 Pages Posted: 22 Apr 2020 Last revised: 17 Sep 2020

See all articles by Jose Maria Liberti

Jose Maria Liberti

Northwestern University - Kellogg School of Management; DePaul University

Jason Sturgess

Queen Mary University of London

Andrew Sutherland

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: September 16, 2020

Abstract

We use the introduction of a U.S. commercial credit bureau to study when lenders adopt voluntary information sharing technology and the consequences of this sharing technology for competition and credit access. Our results suggest that lenders trade off access to new markets against heightened competition for their own borrowers. Lenders that do not share initially lose clients to competitors that share, which ultimately compels them to share and leads to the formation of an information sharing system. We exploit variation in bureau membership to demonstrate that information sharing improves access to credit but only for high quality borrowers and only after bureau membership expands. Our results offer the first direct evidence on when financial intermediaries adopt information sharing technologies and how sharing systems form and evolve.

Keywords: Information Sharing, Adverse Selection, Information Rents, Access to Credit, Financial Intermediation, Credit Bureaus, Financial Technology, Technology Adoption, SMEs

JEL Classification: G21, G23, G32

Suggested Citation

Liberti, Jose Maria and Sturgess, Jason and Sutherland, Andrew, How Voluntary Information Sharing Systems Form: Evidence from a U.S. Commercial Credit Bureau (September 16, 2020). Available at SSRN: https://ssrn.com/abstract=3579149 or http://dx.doi.org/10.2139/ssrn.3579149

Jose Maria Liberti

Northwestern University - Kellogg School of Management ( email )

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United States
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(847) 491-5719 (Fax)

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/directory/liberti_jose.aspx

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States
(312) 362-8739 (Phone)
(312) 362-6566 (Fax)

Jason Sturgess

Queen Mary University of London ( email )

Mile End Rd
Mile End Road
London, London E1 4NS
United Kingdom

Andrew Sutherland (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street

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