Mariassunta Giannetti Stockholm School of Economics, CEPR and ECGI

1. Mariassunta Giannetti Stockholm School of Economics, CEPR and ECGI

2. Background • Often banks share information about borrowers’ credit histories and sometimes even about borrowers’ other characteristics • Using a survey of Eastern European companies, BPJ show that information sharing mitigates firm reported financing constraints. • Interesting, made me think • Somewhat under-researched topic

3. Information sharing and private sector performance By Brown-Jappelli-Pagano

4. Questions/Comments on BPJ I • When do mechanisms for information sharing emerge? • Answer important for going beyond the mere correlation • Potential endogeneity problem similar to the one affecting studies of financial development • Banks may ask government to or create themselves information sharing mechanisms when they want (e.g., have enough funds to) tap new segments of the credit market • The latter omitted factor (not information sharing) may lead to a reduction of financing constraints • This problem is particularly severe especially for private sector registries • Also in this case, information sharing would appear “necessary” but more careful wording needed • In regressions, at least control for banking system development

5. Questions/Comments on BPJ II • Doubts about the definition of financing constraints • Can we compare across firms the reported intensity of financing constraints? • Noise possibly random but may also affect systematically some countries • In the panel regressions, I would explore the probability of relaxation of financing constraints for a given firm. • It would not depend on the reported intensity of financing constraints

6. Questions/Comments on BPJ III • Curious about the differences between private and public credit registries • Since they often co-exist they must not collect the same information • Who has access to private credit registries? • Possible anti-competitive effect on new entrants.

7. Did branching deregulation accelerate growth? By Rocco Huang

8. Background • Uses border counties to evaluate the effects of deregulation in the US • Control group not affected by deregulation but sharing a border should have similar growth opportunities • Methodological contribution to evaluate standard error • I would stress the economics more than the method as after all bootstrapping standard error is now quite conventional • Contrary to the previous literature, Rocco finds no effects of financial deregulation on growth.

9. Comments on Huang I • Borrowers may use banks in the neighboring county to obtain loans • Rocco attempts to evaluate spillover effects using hinterland (not border) counties. • However, depending on distance it may still be close • For instance, finance companies may easily reallocate credit to the border county that did not deregulate. • Distance may make more difficult to reach relatively more distant counties • The effect captured by previous literature • Are significant difference in growth more likely to be detected in counties that are more spread out? • If yes, I would worry about spillover effect • Need to provide descriptive about size of the geographic areas, distance between main geographic points. • Michigan, Kansas, Colorado, Just more space?

10. Comments on Huang II • What is driving the different results? • A lot of things in the paper methodologically different from previous literature • Differences in growth are not average across deregulation events • Control and treatment are contiguous counties not deregulating and non deregulating states • Errors are bootstrapped • And corrected for spatial correlation • Controls for the change in income gap and growth opportunities • …but which one is the most important?

11. Comments on Huang III • Other ways to identify the effects • Deregulation should have affected bank lending (even though not growth as banks were substituted by finance companies) • Do we observe differences in the quality of bank loans between treatment and control group? • Not sure this can be observed a the county level • Jayaratne and Strahan (1994) suggest that deregulation improved ban lending policies (lower proportion of non performing loans etc.)

12. The economics of the EU’s corporate insolvency law By Oren Sussman

13. Background • Paper wants to argue that harmonization may increase the cost of debt because forces firms in rigid contracts • It simply looks at changes in leverage before and after the harmonization and finds that firms in some countries (why those ones??) decrease their leverage after the harmonization • Perplexed • Oren should ask Rocco to bootstrap errors…not even firm level clustering that in this case in warranted • Given the level of the t-stats everything may disappear, even without Rocco’s rigour… • I do not comment on the part of the paper that are not based on analysis or other findings of other paper

14. Should we look at actual changes in bankruptcy laws? • Firms’ perceived cost of debt may increase just because bankruptcy laws become tougher or because the court responsible for foreign owned firms is tougher/applies tougher laws. • Arguable whether it is bad or good. Michelle White in two nice and rigorous papers finds that in the US states with tougher bankruptcy laws existing firms borrow less but new entrepreneurs have easier access to external funds • That’s the way to go…

15. Also, some theory may be useful… • Gennaioli and Rossi (2006) show that the relevant court matters because affects the ex-ante shape of financial contracts…