mitigate principal-agent problems in credit markets by reforming bankruptcy laws and enacting new legislation regarding creditor rights. Many countries also tried to improve information sharing among lenders by fostering the development of credit bureaus. Credit bureaus make borrowers’ loan payment history available to different lenders, facilitating information exchanges and reducing screening costs. Credit bureaus also increase incentives for repayment, since borrowers know that their reputations will be shared among different creditors.<sup>37</sup> Governments tried to create a supportive environment for private credit bureaus by enacting credit reporting laws that allow the sharing of information among creditors and in many cases created public credit registries. Miller (2003) reports that 15 countries, including nine Latin American countries, have established public credit registries since 1989 and that several developing countries in other regions are actively considering similar initiatives. Private credit bureaus have also experienced a significant growth over the last decades, with approximately half of the private credit reporting firms around the world covered by Miller (2003) starting their operations after 1989. In some countries, governments also modified collateral laws and created registries for moveable property in order to allow these assets to be used as collateral, which was expected to benefit smaller firms that are less likely to own fixed assets.<sup>38</sup> Enticed by their potential benefits, governments also implemented several reforms aimed at fostering securities market development.<sup>39</sup> In particular, governments created domestic securities and exchange commissions, developed the regulatory and supervisory framework, and took important strides towards establishing and improving the basic infrastructure for securities market operations. The latter included reforms related to centralized exchanges, securities clearance and settlement systems, custody arrangements, and trading platforms. Moreover, many countries tried to improve corporate governance practices by introducing new standards in a number of different areas, including voting ratings, tender procedures, and the structure of the board of directors.<sup>40</sup> Some countries also improved accounting and disclosure standards and enacted new insider trading regulations.<sup>41</sup>

> 37 McIntosh and Wydick (2004) show that the total effect of credit bureaus can be decomposed in two separate effects (a screening effect and an incentive effect) and that credit bureaus can improve access to financing for the poorest borrowers. Empirically, Japelli and Pagano (2002) find that the presence of credit bureaus, irrespective of whether they are public or private, is associated with deeper credit markets and lower credit risk. Love and Mylenko (2003) find that the existence of private credit bureaus is associated with lower financing constraints, while public credit registries do not seem to have a significant effect.

38 In most developing countries, legal impediments restrict the use of movable property as collateral, as there is little or no information on whether other creditors have claims on the same asset and the repossession process is usually cumbersome (often exceeding the economic life of the movable good). In contrast, lending secured by movable property is widespread in developed countries, reaching almost 40 percent of total credit in the U.S. (Fleising, 1996).

39 See World Bank (2004a) for a description of the evolution of securities markets and related reforms over the last decades, with a focus on Latin America.

40 See Capaul (2003) for an overview of corporate governance reforms in Latin America.

> 41 Bhattacharya and Daouk (2002) find that 39 developing countries have established insider trading regulations since 1990.

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