Bank Misconduct and Online Lending

Christoph Bertsch; Isaiah Hull; Yingjie Qi; Xin Zhang

doi:10.1016/j.jbankfin.2020.105822

Bank Misconduct and Online Lending

Christoph Bertsch, Isaiah Hull, Yingjie Qi, Xin Zhang^*

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › Research › peer-review

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Abstract

We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct‘ measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.

Original language	English
Article number	105822
Journal	Journal of Banking and Finance
Volume	116
Number of pages	23
ISSN	0378-4266
DOIs	https://doi.org/10.1016/j.jbankfin.2020.105822
Publication status	Published - Jul 2020

Keywords

Bank misconduct
Consumer loans
Financial development
FinTech

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10.1016/j.jbankfin.2020.105822Licence: Unspecified

yingjie_qi_bank_misconduct_acceptedversionAccepted author manuscript, 582 KBLicence: CC BY-NC-ND

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@article{a753e7f81f1e4c788c16edc6d7b81cc6,

title = "Bank Misconduct and Online Lending",

abstract = "We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct{\textquoteleft} measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.",

keywords = "Bank misconduct, Consumer loans, Financial development, FinTech, Bank misconduct, Consumer loans, Financial development, FinTech",

author = "Christoph Bertsch and Isaiah Hull and Yingjie Qi and Xin Zhang",

year = "2020",

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language = "English",

volume = "116",

journal = "Journal of Banking and Finance",

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publisher = "Elsevier",

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TY - JOUR

T1 - Bank Misconduct and Online Lending

AU - Bertsch, Christoph

AU - Hull, Isaiah

AU - Qi, Yingjie

AU - Zhang, Xin

PY - 2020/7

Y1 - 2020/7

N2 - We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct‘ measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.

AB - We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection Bureau (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct‘ measures. Furthermore, we show that this effect is strongest for lower rated borrowers and weakest in states with high levels of generalized trust.

KW - Bank misconduct

KW - Consumer loans

KW - Financial development

KW - FinTech

KW - Bank misconduct

KW - Consumer loans

KW - Financial development

KW - FinTech

U2 - 10.1016/j.jbankfin.2020.105822

DO - 10.1016/j.jbankfin.2020.105822

M3 - Journal article

AN - SCOPUS:85084065647

SN - 0378-4266

VL - 116

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

M1 - 105822

ER -