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Bank misconduct and online lending

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Listed:
  • Bertsch, Christoph
  • Hull, Isaiah
  • Qi, Yingjie
  • Zhang, Xin

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.

Suggested Citation

  • Bertsch, Christoph & Hull, Isaiah & Qi, Yingjie & Zhang, Xin, 2020. "Bank misconduct and online lending," Journal of Banking & Finance, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:jbfina:v:116:y:2020:i:c:s0378426620300893
    DOI: 10.1016/j.jbankfin.2020.105822
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    Cited by:

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    2. Abhi Bhattacharya, 2023. "Consumer, bank, and stock market reaction to CFPB’s complaint data disclosure," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(1), pages 128-145, March.
    3. Christian Haddad & Lars Hornuf, 2021. "The Impact of Fintech Startups on Financial Institutions' Performance and Default Risk," CESifo Working Paper Series 9050, CESifo.
    4. Siemroth, Christoph & Hornuf, Lars, 2023. "Why Do Retail Investors Pick Green Investments? A Lab-in-the-Field Experiment with Crowdfunders," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 74-90.
    5. Yufei Xia & Xinyi Guo & Yinguo Li & Lingyun He & Xueyuan Chen, 2022. "Deep learning meets decision trees: An application of a heterogeneous deep forest approach in credit scoring for online consumer lending," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(8), pages 1669-1690, December.
    6. Doumpos, Michalis & Zopounidis, Constantin & Gounopoulos, Dimitrios & Platanakis, Emmanouil & Zhang, Wenke, 2023. "Operational research and artificial intelligence methods in banking," European Journal of Operational Research, Elsevier, vol. 306(1), pages 1-16.
    7. Choudhary, Priya & Thenmozhi, M., 2024. "Fintech and financial sector: ADO analysis and future research agenda," International Review of Financial Analysis, Elsevier, vol. 93(C).
    8. Jinjin Zhang & Xin Li & Yong-Hong Kuo & Yan Chen, 2021. "Coordinating Supply Chain Financing for E-commerce Companies Through a Loan Contract," SAGE Open, , vol. 11(4), pages 21582440211, December.
    9. Pankaj Kumar Maskara & Emre Kuvvet & Gengxuan Chen, 2021. "The role of P2P platforms in enhancing financial inclusion in the United States: An analysis of peer‐to‐peer lending across the rural–urban divide," Financial Management, Financial Management Association International, vol. 50(3), pages 747-774, September.
    10. Zack Jourdan & J. Ken. Corley & Randall Valentine & Arthur M. Tran, 2023. "Fintech: A content analysis of the finance and information systems literature," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-21, December.
    11. Cuadros-Solas, Pedro J. & Cubillas, Elena & Salvador, Carlos & Suárez, Nuria, 2024. "Digital disruptors at the gate. Does FinTech lending affect bank market power and stability?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    12. Rita Rodríguez‐Arrojo & Manuel Luna & Camilo J. Vázquez‐Ordás & Myriam García‐Olalla, 2024. "Mapping research on corporate misconduct in banking: Lessons from literature on preventive and punitive actions," Global Policy, London School of Economics and Political Science, vol. 15(S1), pages 62-75, March.

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    More about this item

    Keywords

    Financial development; Consumer loans; Bank misconduct; FinTech;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • G00 - Financial Economics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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