Big Banks, Household Credit Access, and Intergenerational Economic Mobility (Job Market Paper)
Consolidation in the United States banking industry has led to larger banks. I find that low income households face reduced access to credit when local banks are large. This result appears to stem from large banks’ comparative disadvantage using soft information, which is particularly important for lending to low income households. In contrast, the size of local banks has little or no effect on high income households. Consistent with low income parents’ credit constraints limiting investment in their children’s human capital, areas with larger banks exhibit a greater sensitivity of educational attainment to parental income, and less intergenerational economic mobility.
Best Paper - Columbia/BPI Research Conference (2020)
2020; Columbia/BPI Research Conference, Community Banking in the 21st Century Research Conference, Chicago Financial Institutions Conferencec, 2019; Financial Management Association, 2018; University of Michigan, Southern Methodist University, Vanderbilt University, University of Houston, University of Arizona, American University, Lone Star Finance Conference, FRB Dallas Banking and Finance Workshop
Media Coverage: SMU Cox Bulletin
We provide evidence of discrimination in auto lending. Combining credit bureau records with borrower characteristics, we find that Black and Hispanic applicants’ loan approval rates are 1.5 percentage points lower, even controlling for creditworthiness. In aggregate, discrimination crowds out 80,000 minority loans each year. Results are stronger where racial biases are more prevalent and banking competition is lower. Minority borrowers pay 70 basis point higher interest rates, but default less ceteris paribus, consistent with racial bias rather than statistical discrimination. A major anti-discrimination enforcement policy initiated in 2013, but halted in 2018, reduced discrimination in interest rates by nearly 60%.
Best Paper semifinalist - Financial Management Association Meeting (2019)
2021; SFS Cavalcades, CFPB Research Conferences, 2020; Western Finance Association, Princeton/Atlanta Fed Conference on Racial Justice and Finance (Recording), Northeastern University Finance Conference, Financial Intermediation Research Societyc, 2019; Indiana University*, Southern Methodist University, Texas Christian University*, University at Buffalo*, American University, European Finance Association, Lone Star Finance Conference, FDIC Consumer Research Symposium, Financial Management Association, 2018; Rice University
Media Coverage: Bloomberg (Matt Levine)
I test whether advertising affects stock prices through an investor attention channel. I use corporate sponsorships of college football bowl games as a natural experiment that provides variation in advertising exposure that is unrelated to firm fundamentals. Sponsoring firms' stocks experience large increases in investor attention, abnormally high turnover, and temporary price pressure that is related to bowl games' TV-ratings and score differentials. Retail investors are net buyers of sponsors' stocks, whereas institutional investors initially remain neutral and then start selling, ultimately driving a reversal toward fundamental values. These findings shed light on who wins/loses when advertising attracts investor attention.
Best Paper - Eastern Finance Association Meeting (2015)
2016; Baylor University, 2015; Financial Management Association, Eastern Finance Association
We use individual credit histories to study how creditor-friendly repossession rights in auto lending affect borrowers. Results from a quasi-experimental setting show that bankruptcy rates among subprime auto borrowers increase twice as much following natural disasters in states with strong creditors’ rights compared to states with more borrower protection. Further tests show that auto repossessions increase the likelihood of bankruptcy, and reduce borrowers’ future access to both uncollateralized and collateralized credit, including home mortgage loans. Our findings suggest that creditors’ rights can have broad, negative effects on borrowers that extend beyond merely losing a collateralized asset.
2018; Texas Finance Festival*, CFPB Research Conference, 2017; Cornell University*, Rice University*
Media Coverage: Jalopnik
(* indicates presentation by coauthor, s indicates scheduled, c indicates canceled due to Covid-19)