Does information sharing matter? Cross-country evidence on foreign bank presence

Abstract

This article empirically examines the effects of foreign bank presence on firms’ access to credit, conditional on the level of information sharing in an economy. Using firm-level survey data for 66 emerging and developing countries, we rely on a probit model to identify this impact. Our results show that an increase in foreign bank presence is associated with higher financing constraints for firms and is associated with unfavorable interest rates and higher collateral requirements. However, we find that information sharing partially offsets the negative effect of foreign bank presence on business access to credit. The magnitude of this offsetting effect varies with the type of information sharing; whether through a privately-owned credit bureau or public credit registry.