Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology
I examine how credit reporting affects where firms access credit and how lenders contract with them. I use within firm-time and lender-time tests that exploit lenders joining a credit bureau and sharing information in a staggered pattern. I find information sharing reduces relationship-switching cos...
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| Format: | Article |
| Language: | English |
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Elsevier BV
2019
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| Online Access: | https://hdl.handle.net/1721.1/122352 |
| _version_ | 1826204774060523520 |
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| author | Sutherland, Andrew Gordon |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Sutherland, Andrew Gordon |
| author_sort | Sutherland, Andrew Gordon |
| collection | MIT |
| description | I examine how credit reporting affects where firms access credit and how lenders contract with them. I use within firm-time and lender-time tests that exploit lenders joining a credit bureau and sharing information in a staggered pattern. I find information sharing reduces relationship-switching costs, particularly for firms that are young, small, or have had no defaults. After sharing, lenders transition away from relationship contracting, in two ways: contract maturities in new relationships are shorter, and lenders are less willing to provide financing to their delinquent borrowers. My results highlight the mixed effects of transparency-improving financial technologies on credit availability. Keywords: Debt contracts; Information sharing; Information asymmetries; Hard and soft information; Credit bureaus; Relationship lending; Transactional lending; Information economics; Entrepreneurial finance; Credit reports; Credit scores; FinTech |
| first_indexed | 2024-09-23T13:01:11Z |
| format | Article |
| id | mit-1721.1/122352 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T13:01:11Z |
| publishDate | 2019 |
| publisher | Elsevier BV |
| record_format | dspace |
| spelling | mit-1721.1/1223522022-09-28T11:30:51Z Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology Sutherland, Andrew Gordon Sloan School of Management I examine how credit reporting affects where firms access credit and how lenders contract with them. I use within firm-time and lender-time tests that exploit lenders joining a credit bureau and sharing information in a staggered pattern. I find information sharing reduces relationship-switching costs, particularly for firms that are young, small, or have had no defaults. After sharing, lenders transition away from relationship contracting, in two ways: contract maturities in new relationships are shorter, and lenders are less willing to provide financing to their delinquent borrowers. My results highlight the mixed effects of transparency-improving financial technologies on credit availability. Keywords: Debt contracts; Information sharing; Information asymmetries; Hard and soft information; Credit bureaus; Relationship lending; Transactional lending; Information economics; Entrepreneurial finance; Credit reports; Credit scores; FinTech 2019-10-03T13:53:57Z 2019-10-03T13:53:57Z 2018-08 2019-09-27T11:29:05Z Article http://purl.org/eprint/type/JournalArticle 0165-4101 https://hdl.handle.net/1721.1/122352 Sutherland, Andrew et al. "Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology." Journal of Accounting and Economics 66, 1 (August 2018): 123-141 © 2018 Elsevier en http://dx.doi.org/10.1016/j.jacceco.2018.03.002 Journal of Accounting and Economics Creative Commons Attribution-NonCommercial-NoDerivs License http://creativecommons.org/licenses/by-nc-nd/4.0/ application/pdf Elsevier BV Prof. Sutherland via Shikha Sharma |
| spellingShingle | Sutherland, Andrew Gordon Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology |
| title | Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology |
| title_full | Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology |
| title_fullStr | Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology |
| title_full_unstemmed | Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology |
| title_short | Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology |
| title_sort | does credit reporting lead to a decline in relationship lending evidence from information sharing technology |
| url | https://hdl.handle.net/1721.1/122352 |
| work_keys_str_mv | AT sutherlandandrewgordon doescreditreportingleadtoadeclineinrelationshiplendingevidencefrominformationsharingtechnology |