The Effects of Information on Credit Market Competition: Evidence from Credit Cards

Foley, C. Fritz; Hurtado, Agustin; Liberman, Andres; Sepulveda, Alberto

doi:10.2139/ssrn.3550904

Cited by 5 publications

(4 citation statements)

References 22 publications

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“…5 As a result of these challenges, which are potentially exacerbated in the emerging-market context, similar work in the related field of development finance often focuses on localized survey instruments implemented as a part of field experiments and/or sparse information on household finances available from nationally representative surveys whose primary focus is not household financial information (see, e.g., Heltberg, Oviedo & Talukdar 2015;Mitchell & Mukherjee 2017). There is also a small but growing literature that uses high-quality administrative data on specific areas of the household balance sheet [see, e.g., Foley et al (2019) and Liberman (2016), who use data from Chile, and Van Doornik et al (2018), who use loan data from Brazil].…”

Section: Household Balance Sheets In Emerging Economiesmentioning

confidence: 99%

The Household Finance Landscape in Emerging Economies

Badarinza

Balasubramaniam

Ramadorai

2019

Annu. Rev. Financ. Econ.

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We survey the household finance landscape in emerging economies. We first present statistics on household balance sheets from official microsurveys in countries constituting 45% of the global population: China, India, Bangladesh, the Philippines, Thailand, and South Africa. We contrast these patterns with those in data from advanced economies. We then survey the nascent literature on household finance in emerging economies and discuss areas of overlap with the better-established literature on household finance in advanced economies, as well as the large body of literature on development finance. We highlight useful directions for future research.

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Section: Household Balance Sheets In Emerging Economiesmentioning

confidence: 99%

The Household Finance Landscape in Emerging Economies

Badarinza

Balasubramaniam

Ramadorai

2019

Annu. Rev. Financ. Econ.

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“…First, lenders can respond to information in the platform other than rivals' terms -specifically borrower credit records. There is evidence that this reduction in asymmetric information leads lenders to start lending to new borrowers with different characteristics (Liberti et al (2016), Liberti et al (2017), Foley et al (2018)). To abstract from any change in borrower composition, all of our tests are conducted within an existing relationship.…”

Section: Introductionmentioning

confidence: 99%

Learning about Competitors: Evidence from SME Lending

Darmouni¹,

Sutherland²

2020

The Review of Financial Studies

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We study how small and medium enterprise (SME) lenders react to information about their competitors’ contracting decisions. To isolate this learning from lenders’ common reactions to unobserved shocks to fundamentals, we exploit the staggered entry of lenders into an information-sharing platform. Upon entering, lenders adjust their contract terms toward what others offer. This reaction is mediated by the distribution of market shares: lenders with higher shares or that operate in concentrated markets react less. Thus, contract terms are shaped not only by borrower or lender fundamentals but also by the interaction between information availability and competition.

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“…Murfin and Pratt (2017b) show that market power is important to understand the large share of captive lenders in equipment financing. A number of recent papers study the effect of competition on consumer credit markets: Gissler et al (2018) and Argyle et al (2017b) focus on auto loans, while Foley et al (2018) and Nelson (2017) study credit cards, and Dell'Ariccia et al 2012and Palmer (2015) the mortgage market. On the other hand, we focus on loans to small and medium enterprises (Rice and Strahan, 2010).…”

Section: Related Workmentioning

confidence: 99%

“…The revelation of borrowers' payment histories affects the composition of credit and contract terms. Part of this channel works through a change in the composition of borrowers: worse borrowers are screened out or offered harsher terms, while better borrowers receive better offers (Foley et al, 2018). However, by design, our tests keep the composition of borrower-lender pairs constant by including relationship fixed effects.…”

Section: Revelation Of Credit Historymentioning

confidence: 99%

Learning About Competitors: Evidence From SME Lending

Darmouni

Sutherland

2018

SSRN Journal

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This paper provides evidence of strategic complementarities in lenders' contract terms in SME financing. To isolate this strategic effect from lenders' joint reaction to unobserved common shocks to fundamentals, we exploit the staggered entry of lenders into an information sharing platform. Upon joining, lenders adjust their terms toward what others are offering. This effect is mediated by market power and seems to be driven by incentives to match rivals in order to preserve market share as opposed to learning about fundamentals. We also find evidence that this strategic behavior increased delinquencies during the recent crisis.

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The Effects of Information on Credit Market Competition: Evidence from Credit Cards

Cited by 5 publications

References 22 publications

The Household Finance Landscape in Emerging Economies

The Household Finance Landscape in Emerging Economies

Learning about Competitors: Evidence from SME Lending

Learning About Competitors: Evidence From SME Lending

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