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Economics of Voluntary Information Sharing

Author

Listed:
  • José Liberti

    (DePaul University and Northwestern University)

  • Jason Sturgess

    (Queen Mary University of London)

  • Andrew Sutherland

    (MIT)

Abstract

We show that lenders join a U.S. commercial credit bureau when information asymmetries between incumbents and entrants create an adverse selection problem that hinders market entry. Lenders also delay joining when information asymmetries protect them from competition in existing markets, consistent with lenders trading off new market entry against heightened competition. We exploit shocks to information coverage to show that lenders enter new markets after joining the bureau in a pattern consistent with this trade-off. Our results illuminate why intermediaries voluntarily share information and show how financial technology that mitigates information asymmetries can shape the boundaries of lending.

Suggested Citation

  • José Liberti & Jason Sturgess & Andrew Sutherland, 2018. "Economics of Voluntary Information Sharing," Working Papers 869, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:869
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    References listed on IDEAS

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    2. Xu, Yuqian & Saunders, Anthony & Xiao, Binqing & Li, Xindan, 2020. "Bank relationship loss: The moderating effect of information opacity," Journal of Banking & Finance, Elsevier, vol. 118(C).
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    4. Kang, Jung Koo & Loumioti, Maria & Wittenberg-Moerman, Regina, 2021. "The harmonization of lending standards within banks through mandated loan-level transparency," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    5. Sutherland, Andrew, 2018. "Does credit reporting lead to a decline in relationship lending? Evidence from information sharing technology," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 123-141.

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    More about this item

    Keywords

    information sharing; adverse selection; specialization; financial intermediation; collateral; credit bureaus; fintech;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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