Article: article from journal or magazin.
Credit Reporting, Relationship Banking, and Loan Repayment
Journal of Money, Credit and Banking
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.
credit market, information sharing, relationship banking
Web of science
Last modification date