Culture and Conduct
Friday, Jan. 3, 2020 2:30 PM - 4:30 PM (PDT)
- Chair: Jens Christensen, Federal Reserve Bank of San Francisco
Spillover Effects of the Opioid Epidemic on Consumer Finance
AbstractI examine the impact of the opioid epidemic on subprime auto lending. Using a difference-in-differences framework, I find that county-level increases in opioid abuse cause an increase in loan defaults. Moreover, I find that traditional credit scoring attributes (e.g., FICO score) fail to predict loan performance deterioration associated with opioid addiction. The resulting higher default rates and weaker predictive performance of traditional credit measures generate a negative externality for borrowers in opioid-afflicted areas, as evidenced by 4.4% higher loan costs for subprime borrowers.
The Impact of Organizational Downsizing on Loan Officer Specialization and Credit Defaults
AbstractThis paper studies how organizational downsizing in a bank affects loan officer specialization and the credit default risk of small and medium-sized enterprises. We exploit a wave of early loan officer retirements as a quasi-natural experiment, in which the resulting borrower reallocations exogenously changed the industry specialization levels of the remaining loan officers. In a difference-in-differences analysis excluding all reallocated borrowers, we find that a negative shock to loan officer specialization causes a stronger increase in default rates due to excessive loan growth induced by less accurate default risk information. A positive shock to loan officer specialization generates opposite effects.
- G2 - Financial Institutions and Services
- D1 - Household Behavior and Family Economics