Working Paper: CEPR ID: DP18131
Authors: Thorsten Beck; Patrick Behr; Raquel de Freitas Oliveira
Abstract: Exploiting an exogenous change in the reporting threshold of Brazil’s public credit registry, we show an increase in borrowing for newly included risky firms and lower interest rates for safer firms. The additional lending comes primarily from new private bank-firm relationships, whereas the reduction in interest rates is driven by incumbent lenders. While collateralization decreases, incumbent lenders shorten loan maturities, pointing to important changes in loan contract design. Risky borrowers show a decline (increase) in loan default with incumbent (new) lenders. The policy change translates into higher employment. Our results are consistent with disciplining and competition hypotheses of information sharing and highlight important heterogeneities across firms’ risk profiles and lender types.
Keywords: access to finance; borrower type; information sharing; labor markets; loan contracts; small businesses
JEL Codes: D82; G21; J21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reduction in the reporting threshold (H23) | increase in borrowing (H74) |
| reduction in the reporting threshold (H23) | reduction in interest rates for safer firms (E43) |
| inclusion of risky firms in the credit registry (G21) | decline in loan default rates with new lenders (G21) |
| inclusion of risky firms in the credit registry (G21) | increase in loan default rates with incumbent lenders (G21) |
| reduction in interest rates for safer firms (E43) | higher employment levels (J68) |