Credit Information Sharing and Firm Innovation: An Empirical Evidence

Abstract

This paper investigates the effect of credit information sharing (CIS) on borrower’s innovation activities. On the foundation of unique dataset from developed and developing countries, we find that public credit registries (PCRs) have significant positive relationship with firms’ innovation. These findings contract the facilitative role of CIS in lowering firm’s cost of capital and boost efficiency. Out findings are robust to different specifications and alternative measures. After the establishment of PCRs, firms may benefit more if these firms have more power in enforcing the contracts and have dispersed banking environment. These findings are aligned with the perspective that improvements in creditors’ information sets leads to innovative portfolios and better financing opportunities.