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What Determines Consumer Financial Distress? Place- and Person-Based Factors

Author

Listed:
  • Benjamin J
  • Neale Mahoney
  • Hanbin Yang
  • Tarun Ramadorai

Abstract

We use credit report data to study consumer financial distress in America. We report large, persistent disparities in financial distress across regions. To understand these patterns, we conduct a “movers” analysis. For collections and default, there is only weak convergence following a move, suggesting these types of distress are not primarily caused by place-based factors (e.g., local economic conditions and state laws) but instead reflect person-based characteristics (e.g., financial literacy and risk preferences). In contrast, for personal bankruptcy, we find a sizable place-based effect, which is consistent with anecdotal evidence on how local legal factors influence personal bankruptcy.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Benjamin J & Neale Mahoney & Hanbin Yang & Tarun Ramadorai, 2023. "What Determines Consumer Financial Distress? Place- and Person-Based Factors," The Review of Financial Studies, Society for Financial Studies, vol. 36(1), pages 42-69.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:1:p:42-69.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhac025
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    More about this item

    JEL classification:

    • G5 - Financial Economics - - Household Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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