Credit Reporting, Relationship Banking, and Loan Repayment
Journal
Journal of Money, Credit and Banking
ISSN
0022-2879
ISSN-Digital
1538-4616
Type
journal article
Date Issued
2007-12-01
Author(s)
Abstract
How does information sharing between lenders affect borrowers repayment behavior? We show-in a laboratory credit market-that information sharing increases repayment rates, as borrowers anticipate that a good credit record improves their access to credit. This incentive effect of information sharing is substantial when repayment is not third-party enforceable and lending is dominated by one-shot transactions. If, however, repeat interaction between borrowers and lenders is feasible, the incentive effect of credit reporting is negligible, as bilateral banking relationships discipline borrowers. Information sharing nevertheless affects market outcome by weakening lenders' ability to extract rents from relationships. Copyright 2007 The Ohio State University
Language
English
Keywords
Credit Reporting
Relationship Banking
Loan Repayment
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Wiley-Blackwell
Publisher place
Malden, Mass.
Volume
39
Number
8
Start page
1883
End page
1918
Pages
36
Subject(s)
Eprints ID
72539