Credit information sharing and the bankruptcy risk of commercial banks

Abstract

By using a sample of 3,195 commercial banks in 118 countries over the period 2006-2020, this study examines the impact of credit information sharing on the bankruptcy risk of commercial banks. The regression results indicate that the higher levels of credit information sharing among commercial banks, the lower levels of bank insolvency risk that commercial banks have. Delving into this dimension, this article found that the positive effects of credit information sharing on bank bankruptcy risk are more pronounced for banks in developed countries than those in developing countries. Besides, promoting credit information sharing helps to reduce the insolvency risk of small and medium-sized banks, while not appearing to have a significant impact on large banks. Using a generalised method of moments (GMM), our main findings remain consistent and do not appear to suffer from serious endogeneity problems. Some policy implications arising from our empirical findings are useful for policymakers to understand the behaviour of commercial banks and promote the stability of the banking system.