Entry and Strategic Information Display in Credit Markets

In many countries, lenders voluntarily provide information about their borrowers to private credit registries. A recent World Bank survey reveals that the display of a lender's own borrower information is often not reciprocated. That is, access to these registries does not require the prior pro...

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Bibliographic Details
Published in:The Economic journal (London) 2006-07, Vol.116 (513), p.702-720
Main Authors: Bouckaert, Jan, Degryse, Hans
Format: Article
Language:English
Subjects:
Adverse selection
Bank earnings
Bank loans
Bank markets
Competition between banks
Credit
Economic models
Incumbents
Information displays
Information sharing
Interest rates
Lenders
Studies
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Summary:In many countries, lenders voluntarily provide information about their borrowers to private credit registries. A recent World Bank survey reveals that the display of a lender's own borrower information is often not reciprocated. That is, access to these registries does not require the prior provision of proprietary data. We argue that incumbent lenders release information about a portion of their profitable borrowers for strategic reasons. The reasoning is that the pool of unreleased borrowers becomes characterised by a severe adverse selection problem. This prevents the entrants from bidding for all the incumbent's profitable borrowers and reduces their scale of entry.
ISSN:0013-0133
1468-0297
DOI:10.1111/j.1468-0297.2006.01107.x