DP18131 Information Sharing, Access to Finance, Loan Contract Design, and the Labor Market
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.
