Information Sharing and Credit Rationing: Evidence from the Introduction of a Public Credit Registry

Abstract

We provide the first evidence on how the introduction of information sharing via a public credit registry affects banks’ lending decisions. We employ a unique dataset containing detailed information on credit card applications and decisions from one of the leading banks in China. While we do not find that information sharing decreases credit rationing on average, the distribution of granted credit among borrowers with shared information has a unique pattern. In particular, compared to those with information reported only by this bank, borrowers with extra information shared by other banks receive higher credit card lines. While positive information shared by other banks augments lending of this bank, the effect of negative information shared by other banks is not significant. In addition, the availability of shared information through the Public Registry has mixed effects on how the bank utilizes internally produced information. Last, information sharing alleviates informational barriers in China’s credit card market, but not completely.information sharing;credit availability;credit rationing;credit card