TOXOPLASMOSIS Y GESTACIÓN (RIESGO DE TOXOPLASMOSIS

Theoretical Framework

In principle, exchanging information about borrowers can have four effects on credit markets. First, it reduces adverse selection faced by the lenders (Pagano & Jappelli 1993). Second, it reduces the hold-up problem stemmed from the lenders’ ability to extract informational rents from borrowers within lending relationships (Sharpe 1990; Padilla & Pagano 1997; Von Thadden 2004). Third, it acts as borrower disciplinary device to reduce moral hazard problem making borrowers exert more effort to repay (Vercammen 1995; Padilla & Pagano 2000). Fourth, after revealing the overall indebtedness of borrowers, it reduces over-borrowing that is a result of the borrowers’ ability to borrow a small amount from multiple lenders and become over-debted (Bennardo et al. 2009, 2014).

The first effect is that information sharing can reduce adverse selection in lending. Exchanging credit information provides banks with more knowledge of loan applicants’ characteristics and allows more precise prediction of repayment rate. According to Pagano and Jappelli (1993), they show that credit information sharing reduces adverse selection in bank lending. In the pure adverse selection model developed by Pagano and Jappelli (1993), they show that information sharing improves the pool of borrowers, decreases defaults and reduces the average interest rate. If banks exchange their private information about their borrowers’ quality, then they can correctly identify the applicants who are creditworthy and price their loans better. Since all banks do not have the same information about all borrowers, information sharing among banks can help make the right decision to safely lend to the new loan applicants who previously borrow from other banks. As a result of this, the defaults decrease. However, the effect of information sharing on the amount of lending is still ambiguous because the change in the volume of lending depends on the force between the increase in lending to safe borrowers and the decrease in lending to risky one. Total lending increases if the increase in lending to safe borrowers is more than the decrease in lending to risky one.

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The second effect is that information sharing reduces a hold-up problem, which occurs from banks having private information about firms. When banks possess private information, this creates an informational advantage against other competitors and allows banks to extract higher interest rate from their customers in the future (Sharpe 1990; Von Thadden 2004). According to Padilla and Pagano (1997), they make this point in the context of a two-period model where each bank has private information about their borrowers. From this informational advantage, it gives banks some market power to extract the informational rent by charging higher interest rate in the future; thus, creating a hold-up problem. Knowing this, borrowers put low effort to perform to repay their debts. However, with the presence of credit information sharing, it restrains banks’ bargaining power to extract information rents in the future. As a result, borrowers have greater incentive to invest effort in their project to ensure its success; thus, making borrowers more likely to repay, which in turn induces banks’ willingness to lower lending rates and extend more credit. Thus, information sharing in this case unambiguously increases the volume of bank lending.

The third effect is that information sharing reduces moral hazard making borrowers become disciplined in their repayment. Klein (1992) shows that when the legal environment makes it difficult for banks to enforce credit contracts, information sharing can encourage borrowers to repay loans because they know that defaulters will be blacklisted. The disciplinary effect is also supported by Vercammen (1995). Padilla and Pagano (2000) also support this effect showing that sharing information about borrowers’ past default creates a disciplinary effect instead of sharing borrowers’ characteristics. Default information is a signal for bad quality for outside banks and a penalty like higher interest rate is needed. To avoid a penalty, borrowers exert more effort leading to lower default probability, lower interest rate, and higher banks’ willingness-to-lending. Contrasting with the result of Padilla and Pagano (1997), sharing information about borrowers’ characteristics in the model of Padilla and Pagano (2000) has no effect on default and interest rates. In addition, sharing borrowers’ characteristics in the model of Padilla and Pagano (2000) can even reduce willingness to lend because banks lose informational rents, so they require a higher probability of repayment which is unchanged in the model. It does not change because of the unchanged level of effort and default rate.

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Finally, the fourth effect is that information sharing helps to reduce over-borrowing in multiple-lending relationships (Bennardo et al. 2014). Borrowing from several banks induces opportunistic behavior among borrowers, causing them to over-borrow (Petersen & Rajan 1994; Bennardo et al. 2014). Borrowers have incentives to take so much credit and end up default. Fearing over the overall indebtedness of their borrowers, banks may response by rationing credit, deny credit, or increase an interest rate. Bennardo et al. (2014) show that sharing credit information allows lenders to assess total outstanding debts of borrowers from all lending sources, so they can lend safely and over-borrowing, as well as default, are less likely. Hence, in general, information sharing expands the availability of credit.

In summary, information sharing is considered to reduce default rate and interest rate but the effect on lending is still ambiguous across models. The predicted impact of information sharing on the volume of bank lending is ambiguous in the adverse selection model proposed by Pagano and Jappelli (1993), but the impact is positive in the hold-up model of Padilla and Pagano (1997) and in the multiple-bank lending model of Bennardo et al. (2009). Also, the types of sharing information determine the effect on lending volume as shown in the model of Padilla and Pagano (2000). Regarding to the model of Padilla and Pagano (2000), sharing only default data increases the volume of lending more than the level when banks also share borrowers’ characteristics.

Empirical Evidence

On empirical front, most evidence supports that information sharing improves credit market performance. Country-level studies (Jappelli & Pagano 2002; Djankov et al. 2007) employ country-level aggregate data and confirm the positive effect of credit information sharing on bank lending to private sector. In addition, the study of Jappelli and Pagano (2002) find that the impact is similar regardless of the private or public nature of the information sharing mechanism. Public credit registers are less likely to be established in countries where private credit bureau already exists. Djankov et al. (2007) extend the study of Jappelli and Pagano (2002) by increasing the number of the country from 43 to 129 countries around the world. They also find that the ratio of private credit to GDP rises following either the improvement of creditor rights or the incidence of credit registries. The effect of information sharing is stronger in the poor countries.

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Regarding firm-level evidence, Love and Mylenko (2003) use a cross-sectional firm- level data from the World Business Environment Survey (WBES) and find that private credit bureaus are associated with lower firm’s financing constraints and a higher share of bank financing, while no significant effect of public credit registries on firm’s financial constraints. This contrasts the result from Djankov et al. (2007) who find the significant impact of public credit registries on credit to private sector in poorer countries.

Extension of the work by Love and Mylenko (2003), Brown et al. (2009) employ both cross-sectional and panel estimations. They find that information sharing is related to improved credit availability and lower cost of credit to firms in 24 transition countries of Eastern Europe and the former Soviet Union. Using a cross-sectional analysis, they provide additional evidence that credit information sharing is beneficial to opaque firms more than transparent firms, and the impact is stronger in countries where legal environments are weak. This result suggests that information sharing and accounting transparency are substitutes in improving the availability of credit. By employing a panel data, they also find that information sharing improves access to credit and reduces the cost of finance in countries amid poor protection of creditors. However, information sharing has no effects on countries that creditors are well protected. This suggests that information sharing is a substitute for creditor rights, which is consistent with the result of Djankov et al. (2007).

Regarding bank-level evidence, Grajzl and Laptieva (2011) use bank-level panel data on Ukraine and find that information sharing through private credit bureau increases the volume of bank lending while there is no significant effect of information through the public credit registry on the volume of credit. This insignificant impact of the public credit registry on the volume of credit is inconsistent with the result found by Djankov et al. (2007), in which the impact of public credit registry is positively correlated with the volume of credit in poorer countries.

Covering African countries, Fosu (2014) explores the effect of credit information sharing on bank lending using bank-level data from African countries from 2004 to 2009. The results suggest that bank lending increases with credit information sharing. Furthermore, employing banking market concentration measures, he finds that the increase in bank lending decreases with banking market concentration suggesting that information asymmetry is less of a problem in more concentrated banking markets. Interpreting differently, banking

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concentration is less harmful when there is more asymmetric information (no credit information is shared).

As several of country-level, firm-level, and bank-level evidence support the positive impact of credit information sharing on the availability of credit, it is expected that credit information sharing to have a positive impact on bank lending. Therefore, we hypothesize as follows:

Hypothesis 1: Credit information sharing is expected to increase bank lending.