Does transparency about banks' lending costs lower firms' borrowing costs? Evidence from India

• 成果类型: Article
• 署名作者: Tantri, Prasanna; Vishen, Nitin
• 署名单位: Indian School of Business (ISB); Indian Institute of Management (IIM System); Indian Institute of Management Bangalore
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2024.101737
• 发表日期: 2025
• 关键词: FINANCIAL STABILITY; INFORMATION; disclosure; liquidity; debt

摘要

We study the impact of transparency about banks' costs on loan interest rates. The Indian Central Bank required banks to disclose a cost-based benchmark interest rate instead of the prime rate. The banks could price loans using any spread to the cost-based benchmark. We find that this change, which made banks' cost structures more transparent, lowers the interest rates charged and leads to increases in debtor firms' total borrowings and investments. We hypothesize that increased cost transparency reveals relationship rents to competitor banks and makes it difficult for incumbent banks to maintain high relationship rents because of increased threat of entry.