Description:

Speaker: Nathalie Basto Aguirre 

Title: Real Effects of Firms’ Credit Information

Abstract: Financial frictions hinder firm investment and growth, affecting productivity and development. Credit access is crucial for SMEs, often challenged by information asymmetry. Credit registries improve lender information and repayment incentives, providing SMEs with "reputational collateral" to boost credit access. However, excluding incidental delinquents raises concerns about balancing information sharing and borrower protection.

This study examines the effects of limiting credit information for firms through Colombia's Clean Slate policy, a one-time amnesty in 2021 that deleted negative credit reports for previously delinquent SMEs. Using a difference in discontinuities design based on the revenue cutoff for SME classification, we find that restricting information increased credit access for prior delinquents without raising interest rates for this group. Conversely, clean-record firms were negatively affected by the informational externality induced by the policy, experiencing reduced credit access and significantly higher interest rates as banks adjusted their risk assessments. Overall, the policy tightened credit markets, with suggestive evidence of impacts on firm growth and employment, highlighting the trade-offs of such interventions in balancing credit access and market efficiency.