Research
Working Papers
Fintech Access and Consumption Smoothing
(with Long Chen, Xavier Giroud, and Neng Wang, 2024)
We identify and quantify the effect of the access to Fintech consumer credit service on consumption following a shock. Using data from the leading digital payment platform in China, we find that accessing Fintech credit services resulted in a 21.99% higher monthly consumption in the two-year period after the COVID-19 shock. The effect is stronger in a shorter period, with 28.71% in a half-year period. Variations in the durations of lockdowns show a stronger effect in the regions that experienced more severe shocks. We then provide two channels to explain the effect. One is the income channel; consumers with lower income or from less developed areas benefit more from Fintech access. The other channel is financial literacy. Using proxies including education level and the financial sophistication index we construct, we find that the value of fintech credit access is higher for those lacking financial literacy.
Big Tech Credit Risk
(with Long Chen, Jon Frost, and Yi Huang, 2024)
Big tech companies are becoming increasingly active in finance around the world, including in credit markets. Their platform-based business model and information advantage and use of big data and machine learning can give them benefits in real-time credit risk assessment, contract enforcement, and dynamic risk management. We look at how the credit risk of a big tech lender in China performed during the COVID-19 shock. The probability of default (PD) and loss given default (LGD) rose only moderately during the shock. We show that real-time adjustments in credit limits and terms were able to contain credit losses for “offline” borrowers. The underlying mechanism is that the value of digital platform services (and the threat of platform exclusion) was a powerful incentive for “online” borrowers dependent on activities on the big tech platform. In addition, those platform advantages are stronger for the borrowers in the city, which has higher COVID-19 shocks and city-level default history.
Monopoly and Competition in the Market for Information
(2019, SSRN) A new version is coming soon!
Selected Works in Progress
Optimal Menus, Moral Hazard, and Adverse Selection in Data-Rich Lending Markets
(with Robert M. Townsend and André Sztutman)
Personalized Recommendation and Consumer Experiences
(with Alessandro Acquisti)