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Bank competition, concentration, and credit reporting

Author

Listed:
  • Bruhn, Miriam
  • Farazi, Subika
  • Kanz, Martin
Abstract
This paper explores the empirical relationship between bank competition, bank concentration, and the emergence of credit reporting institutions. The authors find that countries with lower entry barriers into the banking market (that is, a greater threat of competition) are less likely to have a credit bureau, presumably because banks are less willing to share proprietary information when the threat of market entry is high. In addition, a credit bureau is significantly less likely to emerge in economies characterized by a high degree of bank concentration. The authors argue that the reason for this finding is that large banks stand to lose more monopoly rents from sharing their extensive information with smaller players. In contrast, the data show no significant relationship between bank competition or concentration and the emergence of a public credit registry, where banks'participation is mandatory. The results highlight that policies designed to promote the voluntary creation of a credit bureau need to take into account banks'incentives to extract monopoly rents from proprietary credit information.

Suggested Citation

  • Bruhn, Miriam & Farazi, Subika & Kanz, Martin, 2013. "Bank competition, concentration, and credit reporting," Policy Research Working Paper Series 6442, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6442
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    References listed on IDEAS

    as
    1. Pagano, Marco & Jappelli, Tullio, 1993. "Information Sharing in Credit Markets," Journal of Finance, American Finance Association, vol. 48(5), pages 1693-1718, December.
    2. Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, vol. 84(2), pages 299-329, May.
    3. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, April.
    4. Brown, Martin & Jappelli, Tullio & Pagano, Marco, 2009. "Information sharing and credit: Firm-level evidence from transition countries," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 151-172, April.
    5. Jan Bouckaert & Hans Degryse, 2006. "Entry and Strategic Information Display in Credit Markets," Economic Journal, Royal Economic Society, vol. 116(513), pages 702-720, July.
    6. de Janvry, Alain & McIntosh, Craig & Sadoulet, Elisabeth, 2010. "The supply- and demand-side impacts of credit market information," Journal of Development Economics, Elsevier, vol. 93(2), pages 173-188, November.
    7. John H. Boyd & Gianni De Nicoló, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, vol. 60(3), pages 1329-1343, June.
    8. Jappelli, Tullio & Pagano, Marco, 2002. "Information sharing, lending and defaults: Cross-country evidence," Journal of Banking & Finance, Elsevier, vol. 26(10), pages 2017-2045, October.
    9. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
    10. Brown, Martin & Zehnder, Christian, 2010. "The emergence of information sharing in credit markets," Journal of Financial Intermediation, Elsevier, vol. 19(2), pages 255-278, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Anginer, Deniz & Demirguc-Kunt, Asli & Zhu, Min, 2014. "How does competition affect bank systemic risk?," Journal of Financial Intermediation, Elsevier, vol. 23(1), pages 1-26.
    2. Arráiz,Irani & Bruhn,Miriam & Stucchi,Rodolfo Mario, 2015. "Psychometrics as a tool to improve screening and access to credit," Policy Research Working Paper Series 7506, The World Bank.
    3. Chu, Yinxiao & Li, Zhao & Wei, Jianxing & Wu, Weixing, 2022. "A tale of two markets: Labor market mobility and bank information sharing," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).
    4. Thorsten Beck, 2013. "Finance, growth and fragility: the role of government," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 5(1/2), pages 49-77.
    5. Cihak, Martin & Demirguc-Kunt, Asli, 2013. "Rethinking the state's role in finance," Policy Research Working Paper Series 6400, The World Bank.
    6. 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.
    7. International Monetary Fund, 2014. "Kingdom of the Netherlands—Netherlands: Selected Issues Paper," IMF Staff Country Reports 2014/328, International Monetary Fund.
    8. Williams, Kamilah & Brown, Leanora, 2021. "Does information sharing matter? Cross-country evidence on foreign bank presence," Journal of Economics and Business, Elsevier, vol. 116(C).
    9. Arráiz,Irani & Bruhn,Miriam & Stucchi,Rodolfo Mario, 2015. "Psychometrics as a tool to improve screening and access to credit," Policy Research Working Paper Series 7506, The World Bank.
    10. Liberti, José & Sturgess, Jason & Sutherland, Andrew, 2022. "How voluntary information sharing systems form: Evidence from a U.S. commercial credit bureau," Journal of Financial Economics, Elsevier, vol. 145(3), pages 827-849.
    11. Mamuta, Mikhail (Мамута, Михаил) & Sorokina, O (Сорокина, О.) & Tyan, V (Тян, В.) & Popova, N (Попова, Н.), 2015. "Building a High Quality Infrastructure of Microfinancing and Credit Cooperation for Effective Development [Построение Качественной Инфраструктуры Рынка Микрофинансирования И Кредитной Кооперации Дл," Published Papers mn25, Russian Presidential Academy of National Economy and Public Administration.
    12. Ghosh, Saibal, 2019. "Loan delinquency in banking systems: How effective are credit reporting systems?," Research in International Business and Finance, Elsevier, vol. 47(C), pages 220-236.
    13. Augusto de la Torre & Juan Carlos Gozzi & Sergio L. Schmukler, 2017. "Innovative Experiences in Access to Finance," World Bank Publications - Books, The World Bank Group, number 27529.
    14. Islam, Khan & O’Gorman, Melanie, 2019. "Microcredit contract design: A macroeconomic evaluation," World Development, Elsevier, vol. 124(C), pages 1-1.
    15. Susan Johnson & Richard Williams, 2016. "The political economy of financial inclusion: tailoring donor policy to fit," Development Policy Review, Overseas Development Institute, vol. 34(5), pages 721-743, September.
    16. Andrea Filippo Presbitero & Roberta Rabellotti, 2014. "Is Access to Credit a Constraint for Latin American Enterprises? An Empirical Analysis with Firm-Level Data," Mo.Fi.R. Working Papers 101, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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    More about this item

    Keywords

    Access to Finance; Banks&Banking Reform; Bankruptcy and Resolution of Financial Distress; Debt Markets; Economic Theory&Research;
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