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Credit information sharing and bank loan pricing: Do concentration and governance matter?
Author(s) -
Fosu Samuel,
Danso Albert,
AgyeiBoapeah Henry,
Ntim Collins G.
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.2099
Subject(s) - intermediation , financial intermediary , loan , credit history , financial system , credit reference , information sharing , credit enhancement , business , corporate governance , credit crunch , nexus (standard) , bond market , information asymmetry , monetary economics , economics , finance , credit risk , political science , computer science , embedded system , law
The development of credit information sharing schemes in developing countries has gained significant attention in recent times along with ongoing financial sector reforms. In this paper, we provide first‐hand evidence of the effect of credit information sharing on credit intermediation cost in these countries, and consequently ascertain the extent to which the credit information sharing–credit intermediation cost nexus may be accentuated by banking market concentration and governance quality. Using a large dataset covering 272 banks from 27 African countries over the 2004–2012 period, we uncover four new findings. First, we find that credit information sharing does reduce credit intermediation cost. Second, we show that the relationship between credit intermediation cost and credit information sharing is conditional on banking market concentration. Third, our findings suggest that governance quality moderates the effect of credit information sharing on credit intermediation cost. Finally, we find that banking market concentration reduces credit intermediation cost, but the effect is moderated by credit information sharing. Overall, our findings suggest that credit information sharing may serve as a useful policy tool for achieving financial sector stability in developing countries.