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Segment reporting, Competition, Aggregation, Private information

We use complaints filed with the Consumer Financial Protection Bureau (CFPB) to study the interplay between social norms and the effectiveness of consumer protection laws. We find that a higher level of trust in a given location is associated with a lower number of complaints filed against financial institutions in that location. Employing a difference‐in‐differences approach, we further find that, after the establishment of the CFPB, banks in low‐trust areas reduce fees charged to consumers more compared to banks in high‐trust areas. Our results suggest that the threat of consumer complaints to a government agency affects how banks treat their customers, and they shed light on the interaction between informal culture and formal institutions, as well as on stakeholders’ influence in corporate policies.

This paper analyzes annual corporate governance decisions at firms making initial public offerings (IPOs) of common stock between 1996 and 1999. Our objective is to examine relations between firms’ corporate governance decisions and the informativeness of available measures of managerial performance. We consider financial measures such as earnings and stock return, as well as direct monitoring. We collect a sample of IPO firms from the manufacturing, Internet, and technology (non‐Internet) industries, and examine how the use of various performance measures in annual compensation grants and turnover decisions varies with the information environment of the firm and with the extent of venture capital influence. Consistent with prior research that finds earnings are of limited usefulness in firm valuation for Internet firms, we find Internet firms place less importance on earnings and greater importance on stock returns in determining compensation grants than do non‐Internet firms. We also find that compensation grants of firms with little or no venture capital influence display significantly stronger association with accounting and stock performance measures than those of firms with more intense monitoring by venture capitalists. This result is consistent with direct monitoring and the use of explicit performance measures acting as substitute governance mechanisms.

Using consumer complaints filed with the Consumer Financial Protection Bureau as a measure for the quality of financial products and services, we present evidence of racial disparities in the service quality received by consumers. Consumers in high‐minority communities file more complaints than those in low‐minority communities, and the racial gap in financial complaints increased by more than 60% during the COVID‐19 pandemic. Using a triple‐difference approach, we establish the role of corporate social attitudes, reflected in, for example, inclusive promotion practices and diversity in leadership, in mitigating the complaint racial gap and its pandemic‐period increase. Our results shed light on how inclusive corporate culture filters through an organization to benefit minority communities and underscore the effect of corporate social attitudes on important stakeholder outcomes.