Racial Disparities in the Auto Loan Market with Alex Butler and James Weston

Review of Financial Studies, Forthcoming. (SSRN Link)

Advertising, Investor Attention, and Stock Prices: Evidence from a Natural Experiment

Financial Management (2021), 50 (1), 281-314. (SSRN Link)

  • Best Paper - Eastern Finance Association Meeting (2015)

Working Papers (* indicates presentation by coauthor)

Big Banks, Household Credit Access, and Intergenerational Economic Mobility

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.

  • R&R at the Journal of Financial and Quantitative Analysis

  • Best Paper - Columbia/BPI Research Conference (2020)

  • Presentations: 2020; Columbia/BPI Research Conference, Community Banking in the 21st Century Research Conference, Chicago Financial Institutions Conference (canceled), 2019; Financial Management Association, 2018; Lone Star Finance Conference, FRB Dallas Banking and Finance Workshop, University of Michigan, Southern Methodist University, Vanderbilt University, University of Houston, University of Arizona, American University

  • Summary in the SMU Cox Bulletin

Gender Bias in Promotions: Evidence from Financial Institutions with Ruidi Huang and Darius Miller

We test for gender bias in promotions at financial institutions using two central predictions of Becker’s (1957, 1993) model: firms with bias will (1) raise the promotion bar for marginally promoted female workers, and (2) incur costs from forgoing efficient employment practices. We find support for both of these predictions using a new nationwide panel of mortgage loan officers and their branch managers, encompassing approximately 72,000 workers from over 1,000 shadow banks from 2014 to 2019. Overall, our findings provide evidence that gender bias is an important factor in gender disparities at financial institutions.

  • R&R at the Review of Financial Studies

  • Best Paper - FMA Napa/Sonoma Finance Conference (2022)

  • Presentations: 2023; American Finance Association (scheduled), 2022; Western Finance Association (scheduled), FMA Napa/Sonoma Finance Conference, European Finance Association (scheduled), Financial Intermediation Research Society, Michigan State University*, 2021; Aggie Longhorn Innovation Conference*, ICEA Conference on Gender Inequality, Rice University, Southern Methodist University* (finance, economics)

The Impact of Minority Representation at Mortgage Lenders with Scott Frame, Ruidi Huang, and Adi Sunderam

We study links between the labor market for loan officers and access to mortgage credit. Using novel data matching the (near) universe of mortgage applications to loan officers, we find that minorities are significantly underrepresented among loan officers. Minority borrowers are less likely to complete mortgage applications, have completed applications approved, and to ultimately take-up a loan. These disparities are significantly reduced when minority borrowers work with minority loan officers. Minority borrowers working with minority loan officers also have lower default rates. Our results suggest that minority underrepresentation among loan officers has adverse effects on minority borrowers’ access to credit.

  • Presentations: 2023; American Finance Association (scheduled), 2022; SFS Cavalcade, VSB Mid-Atlantic Research Conference in Finance, AREUEA National Conference, Brigham Young University*, 2021; University of Wisconsin-Madison*, Southern Methodist University, Mortgage Bankers Association

Can Human Capital Explain Income-based Disparities in Financial Services? with Ruidi Huang, James Linck, and Chris Parsons

Access to high-quality financial services is known to vary with local income and wealth. We explore the extent to which financial firms' internal labor allocation decisions contribute to these disparities. Using a near-comprehensive panel of over 350,000 U.S. mortgage loan officers, we document large and persistent differences in loan officer productivity and performance. We then show that firms' hiring and promotion policies disproportionately assign workers with little experience or poor track records to branches serving low-income customers. Further, the consequences of continued poor performance differ by branch location: low sales numbers, underwriting bad loans, and committing misconduct are more tolerated in low-income branches, perpetuating income-based disparities in financial services.

  • Presentations: 2023; American Finance Association (scheduled), 2022; European Finance Association (scheduled), Northern Finance Association (scheduled), CSEF-RCFS Conference on Finance, Labor and Inequality, Southern Methodist University

Alumni Networks in Entrepreneurial Financing with Jon Garfinkel and Emmanuel Yimfor

One in three deals in the early-stage financing market involves an investor and founder from the same alma mater. We show that founders' connections to early-stage investors through shared education networks are more important than school academic quality or shared geography in facilitating access to funding. Early-stage investors tilt their portfolios toward startups from their alma mater and place larger bets on these firms. Connected investments outperform the same investors' non-connected investments. Our results are stronger where information about founder abilities is likely less clear.

  • Presentations: 2021; University of Michigan*

The Effects of Audit Partners on Financial Reporting: Evidence from US Bank Holding Companies with Gauri Bhat, Hemang Desai, Scott Frame, and Christoffer Koch

This paper uses confidential data on audit engagement partner names from regulatory filings of bank holding companies (BHC) to investigate whether partners display individual style that affects the financial reporting of the BHCs. We focus on loan loss provisioning and construct an audit partner-BHC matched panel data set that enables us to track partners across different BHCs over time. We employ two empirical approaches to investigate partner style. The first approach tests whether partner fixed effects are statistically significant in loan loss provisioning models. The second approach tests whether a partner’s history of loan loss provisioning predicts future practices for the same partner. Our empirical evidence does not support systematic differences in loan loss provisioning across audit engagement partners, suggesting that the audit firm’s standards and quality control constrain personal partner style.

  • Presentations: 2022; Rice University*, Tulane University*

Credit Where Credit is Due: Drivers of Subprime Credit with Elizabeth Berger and Alex Butler

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.

  • Presentations: 2018; Texas Finance Festival*, CFPB Research Conference, University of Washington*, University of Rochester*, Vanderbilt University*, Lancaster University*, 2017; Cornell University*, Rice University*

  • Media: Jalopnik