Corporate disclosure and credit market development

Abstract

The nexus between corporate disclosure and credit market development as well as whether the nexus is sensitive to the income classification of countries is not well delineated in the empirical literature. The objective of this paper is to interrogate these issues. In addressing these important issues, we rely on a panel of 122 countries and deploy a battery of econometric techniques. Generally, we find that corporate disclosure promotes credit market development. The results from the analysis of subsamples suggest that the effect of corporate disclosure on credit market development is sensitive to creditor rights protection and the income status of a country. In particular, there is evidence that the interaction between corporate disclosure and creditor rights protection significantly benefits the credit markets only in upper-middle-income countries.

Legal cost of contract enforcement and nonperforming loans: Is credit information sharing relevant?

“…To determine whether the impact of legal costs on NPLs is influenced by the level of credit information sharing which addresses the second question, we include an interaction term ( ) in the model and Equation () modifies to: Note the sign of the coefficient of the interaction term; gauges if the interaction of legal costs with credit information sharing increases or alters the impact of legal costs on NPLs. The overall effect of LEGAL on NPLs is computed as follows: This study improves Adusei and Adeleye (2020, 2021) by evaluating Equation at the mean, minimum, and maximum values of to ascertain the extent to which impacts at different levels of . Following the analytical approach of Adusei and Adeleye (2020, 2021), Adeleye and Eboagu (2019), and Adeleye et al (2020), Equations () and () are subsequently modified to accommodate analyses by income groups and addresses the third question.…”

“…The overall effect of LEGAL on NPLs is computed as follows: This study improves Adusei and Adeleye (2020, 2021) by evaluating Equation at the mean, minimum, and maximum values of to ascertain the extent to which impacts at different levels of . Following the analytical approach of Adusei and Adeleye (2020, 2021), Adeleye and Eboagu (2019), and Adeleye et al (2020), Equations () and () are subsequently modified to accommodate analyses by income groups and addresses the third question.…”

“…However, to know if this interaction improves or worsens the overall impact of LEGAL on NPLs, it becomes important to gauge the interacting relationship at different values of CINFO . This improves Adusei and Adeleye (2020, 2021) such that instead of evaluating at the mean value of CINFO which is 5.333, we consider the minimum and maximum values as well, that is, 0 and 8. In other words, it becomes revealing knowing the overall influence of legal cost on NPLs at different values of credit information sharing.…”

“…As a private or public arrangement, credit information sharing refers to lending institutions sharing proprietary information about their prospective credit clients either via private credit bureaus or public credit registries (Adusei & Adeleye, 2021). The private credit bureaus as well as the public credit registries build database on credit histories of firms and individuals and make it accessible to lenders upon request.…”

“…It is documented that lenders value credit reports when assessing credit applications and tend to reject credit applications with bad credit scores (Arya et al, 2013). Evidence exists that credit information sharing improves NPLs (Adusei & Adeleye, 2021). To the extent that credit information sharing assists lenders to discriminate between bad loan customers and good loan customers which results in improved asset quality, we submit that even if legal cost carries the force of increased supply of loanable funds because of their cheap and safe recovery, it is likely to be moderated by the enhanced credit evaluation aided by credit information sharing.…”