The emergence of information sharing in credit markets

M. Brown, C. Zehnder

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We provide the first systematic empirical analysis of how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones. Lenders may, however, also lose market power by sharing information with competitors. Our results suggest that asymmetric information in the credit market increases the frequency of information sharing between lenders significantly. Stronger competition between lenders reduces information sharing. In credit markets where lenders may fail to coordinate on sharing information, the degree of information asymmetry, rather than lender competition, drives actual information sharing behavior.
Original languageEnglish
Pages (from-to)255-278
JournalJournal of Financial Intermediation
Volume19
Issue number2
Publication statusPublished - 2010

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Credit markets
Information sharing
Asymmetric information
Asymmetric competition
Market power
Asymmetry of information
Competitors
Empirical analysis

Cite this

Brown, M. ; Zehnder, C. / The emergence of information sharing in credit markets. In: Journal of Financial Intermediation. 2010 ; Vol. 19, No. 2. pp. 255-278.
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Brown, M & Zehnder, C 2010, 'The emergence of information sharing in credit markets', Journal of Financial Intermediation, vol. 19, no. 2, pp. 255-278.

The emergence of information sharing in credit markets. / Brown, M.; Zehnder, C.

In: Journal of Financial Intermediation, Vol. 19, No. 2, 2010, p. 255-278.

Research output: Contribution to journalArticleScientificpeer-review

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AB - We provide the first systematic empirical analysis of how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones. Lenders may, however, also lose market power by sharing information with competitors. Our results suggest that asymmetric information in the credit market increases the frequency of information sharing between lenders significantly. Stronger competition between lenders reduces information sharing. In credit markets where lenders may fail to coordinate on sharing information, the degree of information asymmetry, rather than lender competition, drives actual information sharing behavior.

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