Yanting Huang

What role do lenders play in household refinancing? This paper provides insights into this question using a granular dataset that tracks lender-household relationships and household refinancing behavior. The empirical results show that an exogenous disruption to lender-household relationships substantially reduces a household's refinancing probability by 43.96%. Importantly, households do not switch to other lenders following a disruption. Instead, their probability of refinancing with new lenders also declines by 35.05%. The relationship disruption does not affect refinance loans’ interest rates, fees, or performance. The evidence uncovers a novel informing role of lenders, in which relationship lenders help households refinance by informing them of potential refinancing opportunities. The paper further develops a dynamic structural model in which relationships affect both households’ awareness of refinancing opportunities and their loyalty advantage in refinancing, and conducts a counterfactual analysis of lender-targeted policies.

Despite their importance, spillover effects in policy programs are often ignored.  This paper investigates the spillover effects in a large-scale policy program, the Paycheck Protection Program. To identify the causal effects, the paper constructs a novel instrumental variable to capture PPP supply shocks to a business's competitors, based on variation in bank-level labor capacity. The empirical results show that a $100 increase in the average PPP loans granted to competitors results in a 5.06% decline in a business's monthly sales, and this decline is entirely driven by a reduction in the number of transactions, while sales per transaction remains unchanged. The evidence is consistent with negative competition spillover effects. Additional evidence suggests that the competition spillovers may also increase the likelihood of business shutdowns. Overall, the paper highlights the importance of accounting for spillover effects in program evaluation and policy design.