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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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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description 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.
doi_str_mv 10.1111/j.1468-0297.2006.01107.x
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source International Bibliography of the Social Sciences (IBSS); Business Source Ultimate; JSTOR Archival Journals and Primary Sources Collection; EconLit with Full Text; Oxford Journals Online
subjects Adverse selection
Bank earnings
Bank loans
Bank markets
Competition between banks
Credit
Economic models
Incumbents
Information displays
Information sharing
Interest rates
Lenders
Studies
title Entry and Strategic Information Display in Credit Markets
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