Credit information sharing and cost of debt : evidence from the introduction of credit bureaus in developing countries

Fosu, Samuel and Agyei-Boapeah, Henry and Ciftci, Neytullah (2023) Credit information sharing and cost of debt : evidence from the introduction of credit bureaus in developing countries. The Financial Review, 58 (4). pp. 783-810. ISSN 1540-6288

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Abstract

We investigate the effect of credit information sharing on cost of debt, with particular focus on the introduction of credit bureaus in developing countries. Using a large dataset of firms from 28 developing countries over the period 2004-2019, we find that firms’ average cost of debt significantly declines following the introduction of credit bureaus. This finding is robust to an alternative measure of cost of debt, several firm- and country-level controls and to firm- and yearfixed effects. The reduction in cost of debt is more pronounced for less transparent firms and for firms domiciled in countries with weak institutional framework.