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

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 year-fixed effects. The reduction in cost of debt is more pronounced for less transparent firms and for firms domiciled in countries with weak institutional framework.