We study the broad question about the sources of FinTech lending growth by examining a specific representative product for which the technologies of both FinTech and the incumbent competitors can be identified and compared—small business lending. We test whether the presence of incumbents employing different technologies affects FinTech penetration, and find more FinTech lending where large/out-of-market banks are more prevalent. Using stress test exposures and Community Reinvestment Act examinations as instruments, we find that FinTech credit more often substitutes for loans by large/out-of-market banks than small/in-market banks. Results are consistent with FinTech advantages in processing hard information, rather than hardening soft information.

Competitive threats motivate firms to use convertible debt because the possibility of future conversion enhances financial flexibility. Consistent with this intuition, we find that the intensity of competitive threats is positively associated with convertible debt financing at both the extensive and intensive margins. By using large tariff reductions as exogenous shocks to competition we show that this relation is likely causal. Convertible debt usage in response to competitive threats strongly depends on a firm’s relative financial and competitive conditions. In addition, firms increase the probability of future conversion by tailoring convertible debt features.

This paper highlights a connection between the stability of a bank’s funding sources (debt claims) and the liquidity of assets backing those claims. Using a natural experiment and hand-collected data on over 5,000 repurchase contracts, the paper shows that a shock that increased the liquidity of private-label MBS resulted in a greater proportion of MBS financed on balance sheet by unstable funding sources (short-term repo debt). This finding is relevant to a recent banking crisis (the SVB collapse in March 2023) in which losses on a bank’s liquid assets led to a run by uninsured (“flighty”) depositors financing those assets

This paper is the first to explore emotional support as an important determinant of household financial outcomes. Using microdata from the United States and Australia, I document that individuals who feel emotionally supported are less likely to experience financial distress. This relationship is not confounded by nonemotional aspects of social support and is confirmed by between-siblings and within-individual analyses. Further investigation suggests emotional support helps to overcome psychological barriers that impede individuals from taking precautions against adverse shocks. Moreover, when such shocks occur, those with strong emotional support can better cope with the adversity as emotional support boosts their confidence

We analyze how countercyclical liquidity policy—via reserve requirements (RRs)—affects the credit cycle. For identification, we exploit supervisory credit register data and RR changes in Brazil made for monetary and macroprudential purposes and affecting banks differently. We find that countercyclical liquidity policy smooths credit supply cycles at the loan and firm levels. The effects of easing during crises are three times stronger than are those of tightening during booms, particularly for low-risk firms. We also explore interest rate policy. Credit supply effects are stronger among high-risk firms and during tightening, when interest rates are more effective than RRs.

Nonbank financial intermediaries (NBFIs) have grown significantly relative to banks. We argue that this growth reflects a transformation of the activities and risks of banks and NBFIs, driven at least in part by changes in bank regulation. We document through new regulatory data, case studies, and empirical analyses that banks remain special as providers of both routine and emergency liquidity to NBFIs and that the sectors have become increasingly interdependent. We discuss some potential regulatory responses, including considering the two sectors holistically and exploring new ways to internalize the costs of systemic risk arising from bank-NBFI interconnectedness.

We model mortgage refinancing as a bargaining game involving the borrowing household, the incumbent lender, and outside banks. We show that bargaining can provide a competitive advantage to the incumbent bank. In equilibrium, the borrower’s ability to refinance depends on the incumbent bank’s cost (dis)advantage relative to locally present competing banks and on the average creditworthiness of borrowers in the relevant market. It is also driven by borrower impatience and switching costs. We find empirical support for the key predictions of our model in an administrative data set covering the universe of mortgages in Belgium.

We study the relationship between managerial ownership and firm performance in a unique private firm setting. The simplicity of the ownership structure and nature of our sample firms help isolate the incentive-aligning effect of managerial ownership from the influence of other effects. We find that managerial ownership is positively associated with firm performance. This positive association is concave but not reversed as ownership increases, indicating a diminishing effect of ownership on performance. We use unique features of the data to further mitigate endogeneity concerns. Our findings support managerial ownership as an effective incentive-aligning tool in the absence of managerial entrenchment.

Delegating high-stakes decisions creates a fundamental tension: incentivizing experts to acquire unobservable information inevitably distorts their final choices. In a principal-agent setting, we characterize the optimal compensation contract under hidden learning, showing it endogenously generates either contrarian or conformist bias. The direction of this bias depends on learning costs and the precision of public and private information. Our framework links information acquisition incentives to systematic biases in experts’ choices and offers a unifying explanation for conflicting empirical evidence in financial advice: why analysts issue excessive contrarian recommendations, and why inexperienced analysts follow the consensus more than their experienced peers.

We study a nonlinear relationship between corporate investment and Tobin’s q in the cross section of firms. After correcting for nonlinear errors using a repeated measurement of q derived from analysts’ forecasts, we find evidence of varying investment-q sensitivity across firms. The investment-q sensitivity is low for firms with low q. It then becomes more pronounced at intermediate values before weakening at high values of q, resulting in an S-shaped pattern. In the cross section, the true investment-q relation is therefore not strictly linear. Firm investment is predicted to remain similar among firms with low q, suggesting that increases in q do not necessarily lead firms to increase investment significantly.