Influence of Credit Bureau Characteristics on Credit Risks: Evidence From Cross-Country Data

Information disclosure of borrowers’ characteristics improves the functioning of credit markets. It solves the problems of information asymmetry, adverse selection and moral hazard, thus influencing credit risks. Academic literature devoted to informational intermediation proposes that substantial information disclosure by credit bureaus can decrease or increase credit risk. Due to arguments for influence of information disclosure on credit risk in different directions, in this work nonlinear dependence of credit risk from the depth of credit information disclosure is tested. For the purpose of this investigation panel data on 194 countries from 2004 to 2015 was collected. Generalized method of moments was used for the estimation of a dynamic empirical model. Quadratic dependence of credit risk from the depth of information disclosure was found: before a certain threshold credit risk increases, then it decreases. The results of the estimation are robust. Central banks and governments in different countries should foster information intermediaries to disclose either minimum credit information in credit reports or full information about all borrowers’ characteristics.