Publication
Fintech and the future of financial service : a literature review and research agenda. (with Haitian Lu, Bingzhong Wang, and Qing Wu). China Accounting and Finance Review, 22.3 (2020) :107-136.
Job Market Paper
Parent Company Debt and Subsidiary Bank's Risk-taking: Evidence from Large Bank Holding Companies (with Kebin Ma, David R. Skeie, and Jianlin Wang)
We investigate the influence of the parent company's capital structure of a bank holding company's (BHC) on the risk-taking behavior of its subsidiary banks, taking into account the BHC's organizational structure. Our analysis shows that increased parent debt is associated with reduced risk-taking by subsidiary banks. This effect is particularly prominent in BHCs with significant non-bank business, which would give the parent company greater incentives to constrain risk-taking in the subsidiary bank to prevent any spillover of loss. These findings highlight the need to consider the capital structures of the subsidiary, the parent, and the overall BHC—as well as the organizational structure—when assessing a subsidiary bank’s risk profile.
Working Papers
Monetary Policy and Deposit Beta: The Role of Internal Capital Market (Draft available upon request)
I propose a new mechanism — the internal capital market channel(ICM), proxied by the parent debt ratio — to explain how monetary policy influences subsidiary banks’ deposit rate setting, measured primarily through the deposit beta. My key finding is that a higher parent debt ratio is associated with a lower deposit beta. This result suggests that the ICM within a bank holding company (BHC) plays an important role in monetary policy transmission by enabling the transfer of funds from parent companies to their subsidiary banks. Such internal transfers reduce subsidiaries’ reliance on deposit funding and, consequently, weaken the sensitivity of deposit interest rates to the federal funds rate. Moreover, parent company debt can serve as an instrument for managing the capital adequacy of subsidiary banks.
Bank ESG Performance and Lending Behavior in the Mortgage Markets (Draft available upon request)
This paper investigates whether banks' environmental, social, and governance (ESG) ratings influence their mortgage lending decisions toward minority groups. Initial OLS estimates suggest that banks with higher ESG ratings issue fewer mortgage loans—in both volume and number—to minority applicants. The distribution across racial groups is heterogeneous: high-ESG banks lend more to Asian applicants but significantly less to American Indian, Black, and Native Hawaiian borrowers. However, these patterns may be driven by omitted variables related to borrower creditworthiness or reverse causality. To address endogeneity, I employ an instrumental variable analysis using the political leanings of the counties where bank branches are located. The IV results confirm that banks’ ESG practices have no causal impact on mortgage lending decisions. I propose an "irrelevance mechanism" to explain these findings, noting that mortgage decisions are largely automated through Government-Sponsored Enterprises (GSEs) and that ESG metrics often prioritize internal staff diversity over customer-facing lending practices.