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WPS6442
Policy Research Working Paper
6442
Bank Competition, Concentration,
and Credit Reporting
Miriam Bruhn
Subika Farazi
Martin Kanz
The World Bank
Development Research Group
Finance and Private Sector Development Team
May 2013
Policy Research Working Paper 6442
Abstract
This paper explores the empirical relationship between
bank competition, bank concentration, and the
emergence of credit reporting institutions. The authors
find that countries with lower entry barriers into the
banking market (that is, a greater threat of competition)
are less likely to have a credit bureau, presumably because
banks are less willing to share proprietary information
when the threat of market entry is high. In addition,
a credit bureau is significantly less likely to emerge
in economies characterized by a high degree of bank
concentration. The authors argue that the reason for this
finding is that large banks stand to lose more monopoly
rents from sharing their extensive information with
smaller players. In contrast, the data show no significant
relationship between bank competition or concentration
and the emergence of a public credit registry, where
banks’ participation is mandatory. The results highlight
that policies designed to promote the voluntary creation
of a credit bureau need to take into account banks’
incentives to extract monopoly rents from proprietary
credit information.
This paper is a product of the Finance and Private Sector Development Team, Development Research Group. It is part of
a larger effort by the World Bank to provide open access to its research and make a contribution to development policy
discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org.
The authors may be contacted at mbruhn@worldbank.org, sfarazi@worldbank.org, and mkanz@worldbank.org.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development
issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the
names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those
of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and
its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
Produced by the Research Support Team
Bank Competition, Concentration, and
Credit Reporting
Miriam Bruhn
Subika Farazi
Martin Kanz 1
Keywords: Bank competition; bank concentration; credit information.
JEL codes: O16, G21, L1.
1
Development Economics Research Group and Financial and Private Sector Development, The World Bank, 1818 H Street NW,
Washington, DC 20433, U.S.A. Email: mbruhn@worldbank.org, sfarazi@worldbank.org and mkanz@worldbank.org. The
opinions expressed in this paper do not necessarily represent the views of the World Bank, its Executive Directors or the
countries they represent. This paper was prepared as part of the background work for the 2013 Global Financial Development
Report.
1. Introduction
Extensive credit information sharing can have several benefits for the financial system. First,
economic theory predicts that reliable credit information can address the fundamental problem of
asymmetric information between borrowers and lenders (Padilla and Pagano, 2000, and Stiglitz
and Weiss, 1981). Cross-country evidence confirms that the availability of detailed information
about the borrowing and repayment behavior of prospective clients places banks in a better
position to assess default risk, counter adverse selection, and monitor institutional exposures to
credit risk (Pagano and Jappelli, 1993, Japelli and Pagano, 2002, Miller 2003). A recent study of
a Guatemalan micro-lender provides evidence that information sharing is also effective at
altering borrower behavior, countering moral hazard, and improving repayment rates (de Janvry,
McIntosh, and Sadoulet, 2010). Perhaps most importantly, credit reporting allows borrowers to
build a credit history and to use a documented track record of responsible borrowing and
repayment as “reputational collateral” to access credit outside established lending relationships
(Love and Mylenko 2003). 2 In addition, financial regulators can draw on credit reporting
systems to understand the credit risk faced by financial institutions and systemically important
borrowers, to define capital provisioning requirements, and to conduct essential oversight
functions.
Despite the numerous benefits of information sharing for credit market efficiency, credit
reporting institutions do not always emerge spontaneously. About 26 percent of countries do not
have any credit reporting institution at all. Another 19 percent have only a public (i.e.
government mandated) credit registry, but no credit bureau 3. One reason why a credit bureau
may not emerge voluntarily is that the private returns to information sharing are not necessarily
aligned with its public returns. This paper examines two features of the banking market –
competition and concentration – that can influence private returns to joining a credit bureau and
that can thus affect the probability of a credit bureau emerging.
Pagano and Jappelli (1993) develop a model which predicts that the incentive to share
information is greater when lenders are protected from competition by barriers to entry. Brown
and Zehnder (2010) find empirical evidence for a negative relationship between competition and
2
3
See also Padilla and Pagano (2000)
Based on the Doing Business dataset that is described in more detail in section 3.
2
emergence of voluntary information sharing in a laboratory experiment. To our knowledge, our
paper is the first to empirically test the relationship between banking competition and the
voluntary emergence of a credit bureau with cross-country data. We use two recent,
underexplored datasets on credit reporting institutions and bank entry barriers that allow us to
study this relationship in a sample of close to 195 countries. In line with the existing literature,
we find that countries with higher bank entry barriers (i.e. a lower threat of competition) are
significantly more likely to have a credit bureau. However, we also show that where a credit
bureau exists, the absence of competitive pressures is associated with less depth and transparency
of the credit information that is made available by lenders.
We also test an additional set of related hypotheses. Pagano and Jappelli (1993) argue that banks
may not join a credit bureau, or share only limited or incomplete client data, since they can
capture monopoly rents by not sharing proprietary credit information. We point out that, due to
increasing returns to scale, the disincentive for information sharing is particularly relevant for
very large banks. This implies that barriers to credit information sharing may be particularly
pronounced in markets characterized by a high degree of bank concentration. Our data support
this hypothesis: countries with higher bank concentration are significantly less likely to have a
credit bureau. We also find some evidence that bank concentration is associated with lower
coverage of the information reported to existing credit bureaus, potentially because banks try to
hold on to monopoly rents by sharing only partial information.
Finally, bank competition or concentration should not be correlated with the probability of
having a credit registry since participation in a registry is mandatory and banks’ incentives are
only relevant for voluntary information sharing. Confirming this hypothesis, we find no
correlation between bank competition or concentration and the existence of a credit registry.
This paper contributes to the broader empirical literature on the relevance of bank competition
and concentration for the efficiency of financial intermediation. One strand of this literature
argues that competition has a negative impact on systemic stability and the efficiency of financial
intermediation since greater bank competition may weaken screening incentives (Boot and
Thakor, 1993) and can lead to excessive risk-taking (Allen and Gale, 2000, and Hellman,
3
Murdock, and Stiglitz, 2000). Our results suggest an additional reason why greater bank
competition may hamper stability and efficiency of financial intermediation: when the threat of
entry is high, private credit reporting institutions are less likely to emerge, leading to a reduced
availability of credit information for screening and risk-management. While stronger competitive
pressures in a country’s banking sector hinder the establishment of a private credit reporting
institution, greater bank competition is not unambiguously negative. In additional results we
show that, conditional on having a private credit bureau, information sharing is more
comprehensive and transparent in economies characterized by greater bank competition.
The existing literature has also argued that a high degree of bank concentration (as measured for
example by the market share of the largest financial institutions) tends to have a negative impact
on the efficiency of financial intermediation. Banks with greater market power can exploit their
position to charge higher interest rates (Boyd and De Nicoló, 2005) and large banks in highly
concentrated banking systems are more likely to benefit from implicit government guarantees
that may distort market incentives (Schaeck, Čihák, and Wolfe, 2009). The findings presented in
this paper suggest an additional reason why bank concentration may lower the efficiency of
financial intermediation: high concentration is accompanied by sizable monopoly rents to
information and thus lowers the returns to voluntary information sharing.
The remainder of this paper proceeds as follows. In section 2, we summarize related research on
the emergence of credit reporting institutions and state our hypotheses. Section 3 describes the
data. Section 4 discusses our empirical strategy. In section 5, we present the results and section 6
concludes.
2. Background and hypotheses
As outlined in the introduction, the exchange of comprehensive credit information among
lenders is beneficial for credit market efficiency and financial stability. However, private returns
to information sharing are not necessarily aligned with its public returns. This misalignment can
limit the voluntary exchange of credit information among lenders. We study two features of the
competitive structure of a country’s financial sector – bank competition and bank concentration –
4
that can influence private returns to joining a credit bureau and can thereby also affect the
emergence, coverage, and depth of credit reporting systems.
Pagano and Jappelli (1993) point out that membership in a credit bureau entails both benefits and
costs. On the one hand, lenders gain access to better information about potential borrowers. On
the other hand, they also lose the informational advantage over their own borrowers. This leads
to more competition among lenders and reduces monopoly rents to information. Paganao and
Jappelli develop a model which predicts that the incentive to share information is greater when
lenders are protected from competition by barriers to entry. They cite anecdotal evidence
supporting this prediction. In the US, branching regulation has traditionally limited competition
among banks in different states, which may have contributed to voluntary information sharing
among lenders as early as the 1920s. In Italy, in contrast, banks compete nationwide and the
initiative to create the first credit bureau in 1990 was taken by local lending institutions with
national banks joining only later.
Brown and Zehnder (2010) analyze the relationship between competition and emergence of
voluntary information sharing empirically, in a laboratory setting, where they create an
experimental credit market. In the experiment, lenders have to decide whether or not to join a
credit bureau under different market conditions, including two different levels of entry costs into
the local market. The results show that lenders are more likely to share information when entry
barriers are high (i.e. the threat of competition is low), confirming Pagano and Jappelli’s
theoretical prediction.
To our knowledge, our paper is the first to empirically test the relationship between bank
competition and the voluntary emergence of a credit bureau outside the laboratory setting. Based
on the theoretical argument in Pagano and Jappelli, we first test the following hypothesis:
H.1: Countries with lower banking sector competition (high barriers to entry) have a
higher probability of having a private credit reporting institution.
5
Intuitively, this hypothesis arises from the fact that lenders sharing credit information in a market
characterized by high barriers to entry are shielded from the possibility that new competitors will
use this information to gain market share. This protection reduces the private cost of sharing
credit information relative to the case in which barriers to market entry are low. It also resonates
with stylized evidence on the persistence of “closed user groups”, consisting of a small number
of lenders that seek to limit entry by capturing the market for credit information.
Our next hypothesis starts with the observation that for any given bank the costs and benefits of
joining a credit bureau also depend on how much information the bank already has relative to
other lenders in the market. Banks with a large market share earn higher monopoly rents on their
borrower information than banks with a smaller market share, and they thus also stand to lose
more informational rents after joining a credit bureau. In addition, these large players may have
relatively little to gain from sharing information since their set of potential borrowers is
comparatively small to their set of existing borrowers. Taken together, these points lead to our
second hypothesis:
H.2: Countries with lower bank concentration have a higher probability of developing
private credit reporting institutions, since returns to information sharing are declining in a
bank’s market share.
Note that the theoretical arguments leading to both hypotheses 1 and 2 rely on the assumption
that banks voluntarily decide whether to share information in a credit reporting institution or not.
These arguments do thus not apply to intuitions that make information sharing obligatory, i.e.
publicly mandated credit registries. This point leads to our third hypothesis:
H.3: Concentration and competition in the banking market are not associated with the
probability of having a credit registry, as participation in credit registries is not voluntary
and usually mandated by law.
Finally, we look beyond the existence of credit reporting intuitions and ask whether banking
competition and concentration also influence the coverage and depth of information reported to
6
the credit bureau in countries where a bureau exists. Bouckaert and Degryse (2006) develop a
model where banks benefit from strategically sharing only partial data on their borrowers. It is
thus possible that banks use partial information sharing as a tool to maintain their informational
rents after joining a credit bureau. In particular, conditional on a credit bureau being in place,
banks that are protected from entry by new players may be more willing to share full
information. We test the following hypothesis:
H.4: Lower banking sector competition (high barriers to entry) is associated with higher
coverage, depth, and transparency of information reported to the credit bureau in
countries where a bureau exists.
In addition, banks with a large market share may be more reluctant to share full information with
an existing credit bureau in an effort to preserve their market share, resulting in our last
hypothesis:
H.5: Lower bank concentration is associated with higher coverage, depth, and
transparency of information reported to the credit bureau in countries where a bureau
exists.
To the best of our knowledge, this paper is the first to test these hypotheses systematically for a
large set of countries. Our empirical analysis is made possible by two recent and previously
underexplored datasets, as described in the following section.
3. Data description
3.1 Doing Business database on credit reporting institutions
Our data on credit reporting institutions come from a survey conducted by the World Bank’s
Doing Business team. This survey has been implemented yearly since 2003 and the Doing
Business team uses it to generate their indicator on the ease of “Getting Credit” in countries
around the world. In each country that is part of the exercise, the Doing Business survey always
covers the credit registry if it exists and the largest credit bureau if more than one is in
7
existence 4. For this paper, we obtained raw survey data from the Doing Business team, for years
2005 through 2010, covering more than 180 countries.
Based on this raw data, we constructed two variables indicating the existence of credit reporting
institutions in 2010. The first variable is a dummy that is equal to one if the country has a credit
bureau and zero otherwise. The second variable is a dummy that is equal to one if the country
has a credit registry and zero otherwise 5. The Doing Business team defines a credit registry as a
publically owned entity that collects information on borrowers and shares it with regulated
financial institutions. A credit bureau is a privately owned entity which collects information on
borrowers in the financial system and facilitates the exchange of credit among lenders. For the
purpose of this paper and the hypotheses stated in section 2, the key distinction is that the credit
registry makes reporting of loan information mandatory for banks (in many cases for loans above
a certain threshold only), whereas participation in a credit bureau is voluntary. From a broader
perspective, credit registries contain primarily information on loans made by regulated lenders
and capture a loan at the time of origination. This information is often used for regulatory and
supervisory purposes. Credit bureaus tend to contain more repayment information that allows for
the tracking of loans and credit risks over time and they also provide additional data processing
services, such as calculating credit scores. Panel A of table 1 shows that 54.5 percent of the
countries in our sample have a credit bureau and 45.1 percent have a credit registry. Figure 1
further shows that about 74 percent of countries have either institution (26 percent have no credit
reporting institution). Low and middle income countries have a relatively higher presence of
credit registries while credit bureaus are more common in high income countries (Figure 1).
For countries with a credit bureau, we constructed an indicator measuring the coverage of the
information captured in the bureau, by dividing the total loan volume recorded in the bureau by
the country’s GDP. We calculated this indicator as an average over the years 2005 through 2010,
considering only years when a credit bureau existed during this period, since data is missing for
different countries in different years. Panel A in table 1 shows that the average ratio of credit
4
In recent years and in very few cases, the survey has covered more than one credit bureau. The bureaus that are
covered are typically the largest ones in a country.
5
Information on whether a country has a credit bureau or a credit registry is also available on the Doing Business
website.
8
listed to GDP is 0.29, ranging from a value very close to zero to 2.68. We chose to scale credit
listed by GDP instead of the outstanding volume of credit the country since this yields more
observations. One caveat with this variable is that reliable information on volume of credit listed
in the credit bureau is only available for 55 out of 104 countries that have a credit bureau. We
therefore use an alternative measure of credit bureau coverage, as reported by the Doing
Business team and defined as: the total number of individuals plus firms listed in the credit
bureau divided by the adult population of a country. For consistency, we also calculate this
Doing Business measure of credit bureau coverage as the 2005 through 2010 average. As shown
in table 1, this variable is available for 102 countries and has an average of 0.347.
Figure 2 compares both measures of credit bureau coverage across country income groups. The
Doing Business measure indicates higher coverage in middle and high income countries
compared to the credit listed measure. In low income countries, on the other hand, the ratio of
credit listed to GDP is 0.41 while the coverage of individuals plus firms divided by the adult
population is only 0.02. This large discrepancy suggests that in low income countries a small
fraction of individuals or firms hold very large loan volumes.
We also constructed indices measuring (i) the extent of information distributed on each borrower
by the credit bureau and (ii) the transparency of the credit bureau. The information index is
constructed as follows: the Doing Business survey asks a series of questions capturing what type
of information credit bureaus distribute on borrowers, loans, and the repayment history of
borrowers. The questions have a yes (=1) or no (=0) response. The index is constructed by
adding all the questions with an affirmative response and dividing by the number of total
questions. The summary statistics in table 1 show that the values of the index range from 0 to
0.89, with an average of 0.424. The index is available for 94 countries.
With respect to the information reported by credit bureaus, we use another variable that indicates
whether the bureau shares positive information. The exchange of positive information is
particularly costly for banks since it allows borrowers to establish reputational collateral and to
access credit outside established lending relationships. From the perspective of the borrower,
9
reputational collateral can increase access to finance. Credit bureaus in about 65 percent of the
94 countries for which this variable is available share positive information (Table 1).
Figure 3 plots the two measures of depth of credit bureau information across country income
groups. Both measures follow a similar pattern in that middle income countries have the greatest
depth of information, followed by low income countries and then high income countries.
Finally, the transparency index is a tally of affirmative responses to five questions. These
questions ascertain whether borrowers are guaranteed access to their credit history data by law,
whether they can inspect their data in practice, and whether there is a cost for inspecting one’s
own credit information. The average of this index is about 2.5 (table 1). Middle income and high
income countries have higher levels of credit bureau transparency on average than low income
countries (figure 4).
3.2 Measures of competition and concentration
As a measure of banking competition, we chose to use the log minimum capital requirement (in
millions of USD) for banks in 2001 from the World Bank’s 2013 Global Financial Development
Report (GFDR) database. We prefer this measure of bank entry regulation over measures of
market power in banking, such as the Lerner index or the Boone indicator for two reasons. First,
the variable is conceptually closest to the entry barriers that Pagano and Jappelli (1993) include
in their theoretical model and also to the way in which Brown and Zehnder (2010) vary entry
barriers in the lab setting (i.e. through transactions costs for entering a new market). Second,
market power is a function of entry regulation as well as other factors, including the existence
and depth of credit information, and is thus more likely to be endogenous to our outcome
variables (see section 4 for a discussion about reverse causality).
We have data on the minimum capital requirement for 137 countries, ranging from zero to USD
15 billion. Close to 90 percent of the sample have a minimum capital requirement below USD 20
million, with a median of 5.7 million. Figure 5 shows the distribution of minimum capital
requirements below USD 20 million. Since the full distribution of the variable has a long left tail,
10
we use the log minimum capital recruitment in the analysis. Summary statistics for this variable
are in panel B of table 1.
Our measure of bank concentration is the asset share of the three largest banks in a country in the
year 2000 from the GFDR 2013 database. We chose this variable as opposed to other measures
of bank concentration that include a larger number of players in the banking market (asset share
of the five largest banks or Herfindahl index) since our hypothesis 2 in section 2 relates
specifically to the existence of a few very large banks. That is, the disincentives to sharing credit
information are particularly strong for banks that capture a very large share of the market. Panel
B of table 1 shows that the average level of bank concentration in our sample is 0.73, with a
minimum of 0.21 and a maximum of 1.
Data on the minimum capital requirement and on bank concentration is only available for about
135 countries, thus reducing the number of countries included in our empirical analysis.
3.3 Control variables
The last panel of table 1 shows the descriptive statistics for the control variables used in this
paper. The first two variables are (i) a measure of economic development (log of GDP per capita
in the year 2000 from the World Development Indicators) and (ii) a proxy for the depth of the
financial sector (ratio of private credit to GDP in 2000 from the Financial Structure database).
We include two measures of a country’s institutional environment. The first one is an indicator
of the quality of contract enforcement: the log number of days it takes to enforce a contract from
the Doing Business database. We use the first available year for this variable (2003), covering
144 countries. Our second institutional variable is a proxy of creditor rights quality: the credit
rights index from Djankov, McLiesh, and Shleifer (2007) for the year 2000. This index measures
the strength of legal rights of creditors against defaulting debtors and ranges from 0 (weak
creditor rights) to 4 (strong creditor rights). Also from Djankov, McLiesh, and Shleifer, we use
dummy variables for the legal origin of a country (French, Scandinavian, German or
socialist/transition origin, with British legal origin being the omitted category). We add these
variables based on the findings of Djankov, McLiesh, and Shleifer (2007), who find that legal
11
origin is a strong predictor of whether a country has credit information sharing institutions. Both
creditor rights and the legal origins dummies are available for 133 countries.
Finally, we include controls for the ownership structure of the banking sector in 2001: the assets
shares of government and foreign owned banks. Similarly to our measures of banking
competition and concentration these variables come from the GFDR 2013 database. Appendix A
includes more information on the variables used in the analysis and the data sources.
4. Empirical strategy
In order to test empirically whether lower competition and concentration in the banking market
are associated with a higher probability of a credit bureau emerging, we estimate the following
cross-country equation
𝐵𝑢𝑟𝑒𝑎𝑢𝑖 = 𝛼 + 𝛽𝐶𝑜𝑚𝑝𝑒𝑡𝑖𝑡𝑖𝑜𝑛𝑖 + 𝛾𝐶𝑜𝑛𝑐𝑒𝑛𝑡𝑟𝑎𝑡𝑖𝑜𝑛𝑖 + 𝛿𝑋𝑖 + 𝜀𝑖 .
(1)
In this equation, 𝑖 indexes countries, the outcome variable 𝐵𝑢𝑟𝑒𝑎𝑢𝑖 is equal to one if the country
has a credit bureau and equal to zero otherwise, 𝐶𝑜𝑚𝑝𝑒𝑡𝑖𝑡𝑖𝑜𝑛𝑖 is our measure of bank
competition (log minimum capital requirement), 𝐶𝑜𝑛𝑐𝑒𝑛𝑡𝑟𝑎𝑡𝑖𝑜𝑛𝑖 is our measure of banking
concentration (asset share of the largest three banks), 𝑋𝑖 is a vector of country control variables
and 𝜀𝑖 is the error term. We estimate the equation through a Probit regression with robust
standard errors.
The country control variables 𝑋𝑖 include several characteristics that could be correlated with both
our explanatory variables of interest (competition and concentration) and the emergence of a
credit bureau. As discussed in section 3, these variables are GDP per capita, the credit to GDP
ratio, measures of the institutional environment, legal origin dummies, the asset share of
government-owned banks and the asset share of foreign-owned banks.
In line with hypothesis 1 stated in section 2, we expect the coefficient on competition (𝛽) to be
positive. Banks in countries with a higher minimum capital requirement, i.e. with higher entry
12
barriers, should be more willing to share information since the entry barriers shield them from
competition. Hypothesis 2 implies that the coefficient on bank concentration (𝛾) should be
negative. We expect countries with higher bank concentration to have a lower probability of
having a private credit bureau since large banks stand to gain more from not sharing information
with other banks.
In order to test hypothesis 3, we replace the outcome variable in equation (1) with an indicator
variable that is equal to one if the country has a credit registry and equal to zero otherwise. We
expect to find that the coefficients on competition (𝛽) and concentration (𝛾) are statistically
equal to zero in the regression that uses the credit registry indicator as the outcome variable.
Our tests of hypotheses 4 and 5 also use regressions based on equation (1), but with indicators
for the reach, depth, and transparency of credit information as the outcome variables. These
regressions are estimated through OLS whenever outcome variables are not dichotomous (Probit
otherwise). If hypotheses 4 and 5 are correct, we should find a positive coefficient on
competition (𝛽) and a negative coefficient on concentration (𝛾) in these regressions.
Two important concerns when using cross-country estimation as in equation (1) are omitted
variable bias and reverse causality. We include the control variables 𝑋𝑖 to mitigate omitted
variable bias as much as possible. To address potential reverse causality we use explanatory
variables that are pre-determined relative to the outcome variable. Our outcome variable is
measured in 2010, while all the explanatory variables are measured in a year close to 2000 6. In
addition, we chose to use a regulatory variable (log minimum capital requirement) as our
measure of competition instead of a measure of market power, such as the Lerner index. Market
power is determined by entry regulation and other factors, including the existence and depth of
credit information (see GFDR, Box 3.6). Entry regulation on the other hand, is less likely to
respond to availability of credit information, assuming that regulators set minimum capital
requirements independently of the existence of a credit bureau.
6
Section 3 specifies the year of observation for each variable.
13
5. Results
We first estimate equation (1) by including either competition or concentration in the regressions
(table 2 and table 3) and then include both variables together from table 4 on. Columns 1 through
4 of table 2 display marginal effects from estimating equation (1). Column 1 includes only log
GDP per capita and the credit to GDP ratio as control variables. In column 2, we add our
measures of the institutional environment to the regressions. The model in column 3 additionally
controls for legal origin dummy variables, where British legal origin is the omitted category, and
in column 4, we also include the shares of government and foreign ownership of banks in the
regression. As we add more controls to the basic specification, the sample size drops since not all
variables are available for all countries in the sample.
The results in columns 1 through 4 show that countries with a higher minimum capital
requirement are statistically significantly more likely to have a credit bureau, confirming
hypothesis 1 stated in section 2. The magnitude of this relationship implies that going from the
25th percentile of the log minimum capital requirement (0.689) to the 75th percentile (2.326), is
associated with a 15 percentage point increase in the likelihood of having a credit bureau. The
size and statistical significance of this result are relatively robust across the different regression
specifications in table 2. The coefficient drops in size and statistical significance when we
control for the shares of government and foreign owned banks, but the sample also drops to 81
countries, compared to close to 100 countries included in the other specifications.
Columns 5 through 8 replicate the regressions in column 1 and 4, but use the probability that a
country has a credit registry as the outcome variable. According to hypothesis 3 in section 2, we
do not expect competition to be negatively associated with the emergence of a credit registry
since participation in a credit registry is mandatory and thus not dependent on banks’ willingness
to share information. The results in columns 5 through 8 of table 2 confirm this hypothesis. We
do not find a statistically significant relationship between the log minimum capital requirement
and the probability of having a credit registry.
14
Many of the control variables included in table 2 are not statistically significant in the
regressions, with the exception of the legal origin dummies and bank ownership variables.
Countries with French, German, or transition legal origin are less likely to have a credit bureau
than countries with British legal origin. In contrast, countries with French or German legal origin
are more likely to have a credit registry than countries with British origin 7. A higher share of
government owned banks is associated with a lower probability of having a credit bureau and
with a higher probability of having a credit registry. More foreign bank ownership is correlated
with a lower likelihood of having a credit bureau, perhaps because coordination between banks is
more difficult when some are headquartered abroad.
Table 3 shows the estimated relationship between bank concentration and the emergence of
credit reporting. Columns 1 through 4 illustrate that countries with higher concentration in the
banking market are less likely to have a credit bureau, confirming hypothesis 2 in section 2.
Going from the 25th percentile of bank concentration (0.598) to the 75th percentile (0.925), is
associated with a 17.6 percentage point decrease in the likelihood of having a credit bureau. On
the other hand, columns 5 though 8 of table 3 show no statistically significant relationship
between bank concentration and the probability of having a credit registry, as predicted by
hypothesis 3.
Table 4 replicates the analysis from tables 2 and 3, but includes both our measures of
competition and concentration in the regressions 8. The findings are largely consistent with the
results in table 2 and 3. In columns 1 through 4, the coefficients on both log minimum capital
requirement and bank concentration decrease in magnitude relative to tables 2 and 3, but remain
statistically significant in the specifications that include the larger sets of control variables.
We test hypotheses 4 and 5 in tables 5 through 7. That is, we investigate whether, conditional on
a credit bureau having emerged, bank competition and concentration are associated with
7
This is consistent with the findings in Djankov, McLiesh and Shleifer (2007) and Jappelli and Pagano (2002).
A potential issue with including both the measures of competition and concentration in the same regression is that
they may be highly correlated. However, although banking competition and concentration are related concepts, they
are conceptually distinct. A banking sector can be open to competition (i.e. have low barriers to entry) and
concentrated at the same time. In fact, in our sample, the correlation between the log minimum capital requirement
and bank concentration is relatively low (-0.24).
8
15
coverage, depth, and transparency of the information listed in the credit bureau. Tables 5 through
7 keep only countries that have a credit bureau. They display OLS or Probit regressions based on
equation 1 with our measures of reach, depth, and transparency of credit information as the
outcome variables. In tables 5 through 7, we only present results for the two regression
specifications that include the largest sets of control variables (corresponding to columns 3 and 4
of tables 2 though 4).
The results in table 5 indicate no robust relationship between bank competition and coverage of
the credit bureau, for both measures of coverage described in section 3. In line with hypothesis 5,
bank concentration shows a week negative relationship with the volume of credit listed in the
credit bureau. This relationship is, however, not statistically significant in most specifications.
In table 6 we examine the relationship between bank competition, concentration and the type of
credit information that is voluntarily shared, again conditional on the existence of a credit
bureau. Panel A uses the index of different types of credit information as the outcome variable,
whereas panel B focuses on the probability that the credit bureau reports positive information.
The results suggest that both entry barriers and bank concentration have a negative relationship
with depth of information shared and the probability of reporting positive information, but the
estimated coefficients are significant in only two of the specifications (columns 2 and 6). The
positive relationship between competition and depth of information shared contradicts our
hypothesis 4 which predicts that when entry barriers are high banks are more willing to share
extensive information. A possible reason why we find the opposite result from what we expected
is that extensive information sharing has administrative costs in addition to costs in terms of
losing informational rents. Banks may be less willing to incur the administrative costs of sharing
comprehensive and positive information in a less competitive lending environment since they
face less pressure to reach out to new clients.
Finally, in Table 7, we investigate how bank competition and concentration are related to the
transparency of credit reporting, using the credit bureau transparency index (described in section
3) as the outcome of interest. Similarly to our results on the depth of information, we find that
higher bank entry barriers are associated with lower transparency in credit reporting. This finding
16
may again be due to the administrative costs of providing transparent information. Banks may be
reluctant to incur these administrative costs in the absence of competitive pressures that would
make having transparent information on potential clients more valuable.
The findings in table 6 and 7 are also consistent with stylized evidence on the tendency for
“closed user groups” to emerge in a financial sector that is not competitive. This term refers to
groups of lenders that formally or informally exchange credit information between each other,
but restrict access to smaller competitors and new entrants by limiting either the quality or extent
of information that is disclosed to the market as a whole.
Overall, the results in tables 2 though 4 provide empirical support for hypotheses 1 through 3.
Lower bank competition is associated with a higher probability of a credit bureau emerging, and
lower bank concentration is associated with a higher probability of a credit bureau emerging
voluntarily. As expected, neither bank competition nor concentration is correlated with the
existence of a credit registry where participation is mandatory. We do not find evidence in favor
of hypothesis 4. On the contrary, the results how that, countries with higher entry barriers tend to
have less comprehensive and transparent credit bureau information (possibly because
administrative costs of providing extensive information weigh more heavily than gains to this
information in the absence of competitive pressures). However, in line with hypothesis 5, some
of the results weakly suggest that higher bank concentration is associated with lower coverage of
the credit bureau.
6. Conclusion
This paper explores the empirical relationship among banking sector competition, bank
concentration, and the emergence of a credit bureau across countries. Based on the previous
theoretical literature (Pagano and Jappelli, 1993), we argue that countries with higher entry
barriers should be more likely to have a credit bureau since entry barriers lower the threat of
competition and of losing monopoly rents by sharing proprietary credit information. The data
confirm this hypothesis: going from the 25th percentile of entry barriers to the 75th percentile is
associated with a 15 percentage point increase in the likelihood of having a credit bureau.
17
However, we also show that where a credit bureau exists, the absence of competitive pressures is
associated with less depth and transparency of the credit information that is made available by
lenders.
We further argue that, due to increasing returns to scale, the disincentive for information sharing
in order to maintain monopoly rents is particularly relevant for very large banks. This implies
that barriers to credit information sharing may be particularly pronounced in markets
characterized by a high degree of bank concentration. Our empirical results support this
argument. They indicate that going from the 25th percentile of bank concentration to the 75th
percentile, is associated with a 17.6 percentage point decrease in the likelihood of having a credit
bureau. We also find some evidence that bank concentration is associated with lower coverage of
the information reported to existing credit bureaus, potentially because banks try to hold on to
monopoly rents by sharing only partial information.
Finally, bank competition or concentration should not be correlated with the probability of
having a credit registry since participation in a registry is mandatory and banks’ incentives are
only relevant for voluntary information sharing. Confirming this hypothesis, we find no
correlation between bank competition or concentration and the existence of credit registries.
Taken together, results highlight that policies designed to promote the voluntary exchange of
credit information need to take into account banks’ incentives to extract monopoly rents from
proprietary credit information. In addition, policymakers who determine entry barriers into the
banking market should be aware of the side-effects that these barriers can have on voluntary
information sharing.
18
References
Allen, Franklin, and Douglas Gale. 2000. Comparing Financial Systems. Cambridge, MA: MIT
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of Money, Credit and Banking 36(3), Part 2, pp. 453–480.
Boot, Arnoud W. A., and Anjan Thakor. 2000. “Can Relationship Banking Survive
Competition?” Journal of Finance, 55: 679–713.
Bouckaert, J., Degryse, H.. 2006. “Entry and strategic information display in credit markets.”
Economic Journal, 116: 702–720.
Boyd, John H., and Gianni De Nicoló. 2005. “The Theory of Bank Risk-taking and Competition
Revisited.” Journal of Finance, 60: 1329–1343.
Brown, M., Jappelli, T., and Pagano, M. 2009. “Information sharing and credit: firm-level
evidence from transition countries.” Journal of Financial Intermediation, 18: 151–172.
Brown, M. and Zehnder, C. 2010. “The emergence of information sharing in credit markets.”
Journal of Financial Intermediation, 19: 255–278.
de Janvry, A., McIntosh, C. and Sadoulet, E. 2010. “The supply - and demand – side impacts of
credit market information.” Journal of Development Economics, 93 173-188.
Djankov, S., McLiesh, C. and Shleifer, A. 2007. “Private Credit in 129 Countries.” Journal of
Financial Economic, 84: 299-329.
Thomas F., Kevin C. Murdock, and Joseph E. Stiglitz, 2000. “Liberalization, Moral Hazard in
Banking, and Prudential Regulation: Are Capital Requirements Enough?” American Economic
Review, 90(1): 147-165.
Jappelli, T. and Pagano, M. 2002. “Information sharing, lending and defaults: Cross-country
evidence.” Journal of Banking and Finance, 2017-2045.
Love, Inessa, Nataliya Mylenko. 2003. “Credit Reporting and Financing Constraints.” Policy
Research Working Paper 3142, World Bank, Washington, DC.
Miller, M. 2003. Credit Reporting systems around the globe: The state of the art in public credit
registries and private credit reporting firms. In Credit Reporting Systems and the International
Economy, by Margaret J. Miller, 25-79. Cambridge, Massachusetts: The MIT Press.
Padilla, A. and Pagano, M. 2000. “Sharing default information as a borrower discipline device.”
European Economic Review, 1951–1980.
Pagano, M. and Jappelli, T. 1993. “Information sharing in credit markets.” Journal of Finance,
1693-1718.
19
Schaeck, Klaus, Martin Čihák, and Simon Wolfe. 2009. “Are Competitive Banking Systems
More Stable?” Journal of Money, Credit, and Banking 41(4): 711–734.
Stiglitz, Joseph E., and Andrew Murray Weiss. 1981. “Credit Rationing in Markets with
Imperfect Information.” American Economic Review, 71(3): 393–410.
World Bank. 2013. Global Financial Development Report. Washington, DC.
20
Figure 1: Prevalence of credit reporting across country income groups
90
% of countries with...
80
75
74
78
76
72
70
60
55
55
52
51
45
50
37
40
30
22
20
10
0
Total
Low income
Credit bureau
Middle income
Credit registry
High income
Either
Figure 2: Credit bureau coverage across country income groups
0.60
0.55
0.46
0.50
0.41
0.40
0.30
0.35
0.34
0.29
0.20
0.20
0.10
0.02
0.00
Total
Low income
Middle income
High income
Credit listed in credit bureau/GDP
Doing Business measure of credit bureau coverage
21
Figure 3: Depth of information in the credit bureau across country income groups
80
71
65
70
64
60
50
55
52
45
41
35
% 40
30
20
10
0
Total
Low income
Middle income
High income
Index of type of information distributed by credit bureau
Credit bureau reports positive information
Figure 4: Credit bureau transparency index across country income groups
3.0
2.6
2.5
2.5
2.5
1.9
2.0
1.5
1.0
0.5
0.0
Total
Low income
Middle income
Credit bureau transparency index
22
High income
0
.05
Density
.1
.15
Figure 5: Distribution of minimum capital requirement
0
5
10
15
Minimum capital required (thousands of USD)
23
20
Table 1: Summary statistics
Obs
Average
Std. dev.
Min
Max
Panel A: Credit information variables
Country has a credit bureau dummy
Country has a credit registry dummy
Credit listed in credit bureau/GDP
Doing Business measure of credit bureau coverage
Index of type of information distributed by credit bureau
Credit bureau reports positive information dummy
Credit bureau transparency index
191
195
55
102
94
94
94
0.545
0.451
0.294
0.347
0.453
0.649
2.479
0.499
0.499
0.536
0.341
0.274
0.480
1.326
0
0
0
0
0
0
0
1
1
2.684
1
0.964
1
5
Panel B: Measure of competition and concentration
Log minimum capital requirement
Bank concentration (asset share of the largest three banks)
137
135
1.889
0.733
1.449
0.206
-0.667
0.211
10
1.000
Panel C: Control variables
Log GDP per capita
Credit/GDP ratio
Contract enforcement (log # of days to enforce a contract)
Creditor rights index
French legal origin dummy
Scandinavian legal origin dummy
German legal origin dummy
Transition legal origin dummy
Share of gov't owned banks
Share of foreign owned banks
186
171
144
132
132
132
132
132
125
121
7.666
41.863
6.290
1.795
0.485
0.129
0.030
0.083
0.176
0.405
1.638
42.128
0.451
1.151
0.502
0.336
0.172
0.277
0.238
0.332
4.463
0
4.787
0
0
0
0
0
0
0
11.233
222.277
7.320
4
1
1
1
1
0.981
1
24
Table 2: Banking sector competition and the emergence of credit reporting
Probit regressions
Log min. capital req.
Log GDP per capita
Credit/GDP ratio
(1)
0.185***
(0.046)
0.060
(0.040)
0.001
(0.002)
Contract enforcement
Creditor rights index
French legal origin
German legal origin
Transition legal origin
Pr[Credit bureau]=1
(2)
(3)
0.091**
0.085**
(0.038)
(0.041)
0.091***
0.092***
(0.040)
(0.040)
-0.000
-0.000
(0.002)
(0.001)
0.003
-0.018
(0.091)
(0.088)
0.029
0.005
(0.033)
(0.033)
-0.277***
(0.112)
-0.496**
(0.219)
-0.400*
(0.280)
Share of gov't banks
Share of foreign banks
Observations
Pseudo R2
133
0.259
103
0.326
99
0.381
(4)
0.064*
(0.035)
0.053**
(0.032)
-0.000
(0.001)
-0.027
(0.082)
0.017
(0.028)
-0.157*
(0.109)
-0.343*
(0.246)
-0.408*
(0.342)
-0.304**
(0.126)
-0.206*
(0.156)
81
0.366
(5)
0.054
(0.035)
-0.054
(0.038)
-0.002*
(0.001)
133
0.065
Pr[Credit registry]=1
(6)
(7)
(8)
0.012
0.013
0.016
(0.038)
(0.042)
(0.053)
-0.048
-0.071
-0.096
(0.043)
(0.060)
(0.073)
-0.001
-0.001
-0.001
(0.002)
(0.002)
(0.002)
0.127
-0.031
-0.155
(0.118)
(0.138)
(0.163)
-0.068
0.020
0.032
(0.042)
(0.054)
(0.067)
0.658*** 0.695***
(0.114)
(0.133)
0.415*** 0.432***
(0.081)
(0.105)
0.089
-0.070
(0.213)
(0.292)
0.799**
(0.370)
0.020
(0.269)
103
99
81
0.094
0.311
0.346
Notes: Marginal effects from Probit regressions. Robust standard errors in parentheses. Statistical significance levels:
*** p<0.01, ** p<0.05, * p<0.1
25
Table 3: Bank concentration and the emergence of credit reporting
Probit regressions
Bank concentration
Log GDP per capita
Credit/GDP ratio
(1)
-0.473**
(0.227)
0.037
(0.032)
0.002
(0.001)
Contract enforcement
Creditor rights index
French legal origin
German legal origin
Transition legal origin
Pr[Credit bureau]=1
(2)
(3)
-0.457** -0.537**
(0.203)
(0.197)
0.070**
0.083**
(0.036)
(0.039)
0.001
0.001
(0.002)
(0.002)
-0.092
-0.161
(0.097)
(0.110)
0.029
0.017
(0.035)
(0.041)
-0.196*
(0.111)
-0.293
(0.206)
0.377*
(0.236)
Share of gov't banks
Share of foreign banks
Observations
Pseudo R2
129
0.131
112
0.257
108
0.290
(4)
-0.355***
(0.176)
0.014
(0.019)
0.001
(0.001)
-0.072
(0.068)
0.024
(0.020)
-0.172**
(0.096)
-0.419**
(0.285)
-0.657**
(0.329)
-0.177**
(0.102)
-0.140*
(0.094)
77
0.380
(5)
-0.379
(0.237)
-0.051
(0.037)
-0.002
(0.001)
129
0.069
Pr[Credit registry]=1
(6)
(7)
-0.224
-0.063
(0.276)
(0.281)
-0.022
-0.059
(0.041)
(0.057)
-0.002
-0.001
(0.001)
(0.002)
0.156
0.025
(0.123)
(0.136)
-0.056
0.024
(0.042)
(0.054)
0.619***
(0.099)
0.357***
(0.078)
0.074
(0.185)
112
0.079
108
0.304
(8)
0.140
(0.335)
-0.084
(0.073)
-0.001
(0.002)
-0.094
(0.171)
0.019
(0.068)
0.690***
(0.141)
0.400**
(0.113)
-0.079
(0.305)
0.749**
(0.361)
-0.077
(0.283)
77
0.379
Notes: Bank concentration is measured by the asset share of the largest three banks per country. Marginal effects from
Probit regressions. Robust standard errors in parentheses. Statistical significance levels: *** p<0.01, ** p<0.05, * p<0.1
26
Table 4: Bank competition, concentration and the emergence of credit reporting
Probit regressions
Log min. capital req.
Bank concentration
Log GDP per capita
Credit/GDP ratio
Contract enforcement
Creditor rights index
French legal origin
German legal origin
Transition legal origin
Pr[Credit bureau]=1
(1)
(2)
(3)
0.116*** 0.088**
0.074**
(0.040)
(0.036)
(0.035)
-0.268
-0.231
-0.338**
(0.223)
(0.196)
(0.174)
0.038
0.065**
0.047*
(0.035)
(0.036)
(0.033)
0.000
-0.000
-0.000
(0.001)
(0.001)
(0.001)
-0.037
-0.100
(0.096)
(0.086)
0.011
-0.007
(0.031)
(0.029)
-0.276***
(0.114)
-0.478**
(0.223)
-0.617**
(0.284)
Share of gov't banks
Share of foreign banks
Observations
Pseudo R2
109
0.202
94
0.294
90
0.370
(4)
0.045*
(0.025)
-0.333***
(0.182)
0.012
(0.018)
0.000
(0.001)
-0.059
(0.072)
0.017
(0.019)
-0.183**
(0.115)
-0.465**
(0.294)
-0.649**
(0.374)
-0.192**
(0.104)
-0.123
(0.109)
75
0.399
(5)
0.039
(0.037)
-0.383
(0.267)
-0.067
(0.042)
-0.002*
(0.001)
109
0.089
Pr[Credit registry]=1
(6)
(7)
(8)
0.029
0.057
0.050
(0.038) (0.043)
(0.059)
-0.275
-0.016
0.170
(0.303) (0.310)
(0.328)
-0.053
-0.091
-0.086
(0.044) (0.067)
(0.079)
-0.002
-0.002
-0.002
(0.002) (0.002)
(0.002)
0.100
-0.053
-0.097
(0.136) (0.156)
(0.178)
-0.064
0.033
0.023
(0.044) (0.061)
(0.069)
0.710*** 0.710***
(0.114)
(0.136)
0.407*** 0.418**
(0.087)
(0.114)
0.056
-0.036
(0.229)
(0.300)
0.715*
(0.376)
-0.055
(0.290)
94
90
75
0.099
0.371
0.369
Notes: Bank concentration is measured by the asset share of the largest three banks per country. Marginal effects from
Probit regressions. Robust standard errors in parentheses. Statistical significance levels: *** p<0.01, ** p<0.05, * p<0.1
27
Table 5: Reach of credit information
(1)
Panel A
Log minimum capital req.
0.031
(0.064)
Bank concentration
Observations
R2
Panel B
Log minimum capital req.
Bank concentration
Observations
R2
Controls for bank ownership
46
0.135
OLS regressions
(2)
(3)
(4)
(5)
Credit listed in the credit bureau/GDP
0.011
0.046
(0.054)
(0.077)
-0.330 -0.795* -0.398
(0.584) (0.442) (0.606)
39
47
37
44
0.339
0.146
0.394
0.153
(6)
0.046
(0.066)
-0.884*
(0.522)
37
0.405
Doing Business measure of credit bureau coverage
-0.035* -0.029
-0.027
-0.022
(0.021) (0.029)
(0.024) (0.030)
-0.127
-0.253
-0.084
-0.215
(0.166) (0.186) (0.184) (0.194)
79
68
85
65
75
64
0.371
0.434
0.428
0.440
0.364
0.418
No
Yes
No
Yes
No
Yes
Notes: This table only includes countries that have credit bureau. Bank concentration is
measured by the asset share of the largest three banks per country. All regressions include the
following control variables: log GDP per capita, credit/GDP ratio, contract enforcement,
creditor rights index, legal origins dummies. Robust standard errors in parentheses. Statistical
significance levels: *** p<0.01, ** p<0.05, * p<0.1
28
Table 6: Depth of credit information
(1)
Panel A
Log minimum capital req.
Bank concentration
Observations
R2
Panel B
Log minimum capital req.
Bank concentration
Observations
Pseudo R2
Controls for bank ownership
(2)
(3)
(4)
(5)
(6)
OLS regressions
Index of type of information distributed by credit bureau
-0.018
-0.029
-0.020
-0.031*
(0.022) (0.018)
(0.023) (0.018)
0.028
-0.062
-0.001
-0.092
(0.171) (0.165) (0.172) (0.167)
74
65
77
62
70
61
0.251
0.285
0.220
0.296
0.259
0.293
Probit regressions
Pr[Credit bureau reports positive information]=1
-0.034
-0.072*
-0.043
-0.072*
(0.039) (0.041)
(0.039) (0.042)
0.013
-0.098
-0.053
-0.142
(0.313) (0.320) (0.342) (0.340)
70
62
73
59
66
58
0.083
0.173
0.069
0.161
0.098
0.167
No
Yes
No
Yes
No
Yes
Notes: This table only includes countries that have credit bureau. Bank concentration is
measured by the asset share of the largest three banks per country. All regressions include the
following control variables: log GDP per capita, credit/GDP ratio, contract enforcement,
creditor rights index, legal origins dummies. Robust standard errors in parentheses. Statistical
significance levels: *** p<0.01, ** p<0.05, * p<0.1
29
Table 7: Transparency of credit information
(1)
Panel A
Log minimum capital req.
-0.156
(0.100)
Bank concentration
Observations
R2
Controls for bank ownership
74
0.253
No
(2)
(3)
(4)
(5)
OLS regressions
Credit bureau transparency index
-0.212**
-0.161
(0.086)
(0.098)
0.682
0.152
0.321
(0.780) (0.832) (0.772)
65
77
62
70
0.310
0.257
0.313
0.285
Yes
No
Yes
No
(6)
-0.219**
(0.086)
-0.077
(0.820)
61
0.344
Yes
Notes: This table only includes countries that have credit bureau. Bank concentration is measured by
the asset share of the largest three banks per country. All regressions include the following control
variables: log GDP per capita, credit/GDP ratio, contract enforcement, creditor rights index, legal
origins dummies. Robust standard errors in parentheses. Statistical significance levels: *** p<0.01,
** p<0.05, * p<0.1
30
Appendix A
Definition and sources of variables used in regression analysis
Variable
Definition
Source
Credit registry
dummy
The variable equals 1 if a credit registry
operates in a country. A credit registry is
defined as an entity managed by the public
sector (central bank or superintendent of
banks) which collects information on
creditworthiness of borrowers and shares
this information with banks and other
regulated financial institutions. If no credit
registry exists, the variable is 0.
Doing Business
Credit bureau dummy
The variable equals 1 if a credit bureau
operates in a country. A credit bureau is
defined as an entity managed by a private
firm or non-profit organization which
collects information on the
creditworthiness of borrowers and
facilitates the exchange of credit
information among lenders. If no credit
bureau exists, the variable is 0.
Doing Business
Credit listed in the
credit bureau/GDP
Total value of credit listed in a credit
bureau as a share of GDP
Doing Business and World
Development Indicators
Doing Business
measure of credit
bureau coverage
Total number of individuals and firms
listed in a private credit bureau as a share
of the adult population.
Doing Business
Index of type of
information
distributed
Type of information distributed (by a
registry or a bureau) pertains to three
different aspects of lending which includes
data on i) borrowers, ii) loan and iii) loan
repayment. Under each category the
survey lists a number of questions with a 1
(yes) and 0 (no) response option. The index
is constructed as a ratio of the sum of all
the questions with a response of 1 to total
questions listed.
Doing Business
31
Dummy variable indicating whether the
credit bureau reports positive information
Doing Business
Tally of affirmative responses to five
questions (thus ranging from 0 to 5),
asking
whether
borrowers
are
guaranteed access to their credit history
data by law, whether they can inspect
their data in practice, and whether there
is a cost for inspecting one’s own credit
information.
Doing Business
Log of the minimum amount of capital
needed by banks for entry.
GFDR 2013 Database
Bank concentration
Share of assets of three largest banks to
total assets of banking sector.
GFDR 2013 Database
GDP per capita
Log of GDP per capita based on constant
local currency.
World Development
Indicators
Credit to GDP
Deposit money banks and other financial
institutions claims on the private sector as
a percentage of GDP.
Raw data are from the
electronic version of the
IMF’s International Financial
Statistics. Claims on Private
Sector by deposit money
banks and other financial
institutions (IFS lines 22d and
42d); GDP in local currency
(IFS line 99B..ZF
Contract enforcement
Log of number of days it takes from the
time plaintiff files a lawsuit in court until
payment.
Doing Business
Creditor rights index
The index ranges from 0 (weak creditor
rights) to 4 (strong creditor rights) and is
based on whether the following rights of
secured lenders are defined in laws and
regulations. First, whether there exist any
restrictions, such as creditor consent or
minimum dividends, for a debtor to file for
Data is from "Private Credit in
129 Countries", Djankov,
Simeon, Caralee McLiesh and
Andrei Shleifer, Journal of
Financial Economics, 2007
Credit bureau reports
positive information
dummy
Credit bureau
transparency index
Log minimum capital
requirement
32
reorganization. Second, whether secured
creditors are able to seize their collateral
after the reorganization petition is
approved i.e., there is no automatic stay or
asset freeze. Third, whether secured
creditors are paid first out of the proceeds
of liquidating a bankrupt firm, or other
creditors take priority. Fourth, whether
management is not able to retain
administration of its property pending the
resolution of the reorganization. Each
category is assigned a value 1 if it is
defined in laws and the index is a sum of
the four categories.
Legal origin
A dummy variable that captures the legal
origin of a country. The five legal origins
are: English, French, German,
Scandinavian, and Socialist.
Data is from "Private Credit in
129 Countries", Djankov,
Simeon, Caralee McLiesh and
Andrei Shleifer, Journal of
Financial Economics, 2007
Share of government
banks
Share of assets of government owned
banks to total assets of the banking sector.
GFDR 2013 Database
Share of foreign
banks
Share of assets of foreign owned banks to
total assets of the banking sector.
GFDR 2013 Database
33