Summary: | I use the introduction of an equipment finance credit bureau to examine the effects of lenders sharing borrower information on relationship dynamics and investment. My within-borrower-time tests exploit the fact that firms have ongoing relationships with multiple lenders that join the bureau in a staggered pattern. I find that the exchange of payment history and contract information reduces the switching costs associated with firms ending existing relationships and forming new ones with bureau members. Consistent with theoretical predictions, firms with a lengthy track record of borrowing without a serious delinquency drive this effect. Finally, I show that a reduction in switching costs has important implications for lenders' willingness to invest in relationships. Contract maturities for new relationships are shorter, and lenders are less likely to provide additional financing to a borrower following delinquencies. Collectively, my results provide the first contract-level evidence on the effects of information sharing on relationship lending and investment.
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