I cordially invite you to attend my dissertation proposal scheduled for Tuesday, April 18th, from 2:00 pm to 3:30 pm EST in Room 314, Scheller College of Business.

You are also welcome to join remotely via Zoom: https://gatech.zoom.us/j/99323566674.

An overview is included below, and copies of the proposal are available upon request.

Best regards,

Yafei

Yafei Zhang

Ph.D. Candidate in Finance

Georgia Institute of Technology | Scheller College of Business

800 West Peachtree Street NW, Atlanta, Georgia 30308-1149

Email: yafei.zhang@gatech.edu | Mobile: +1 404-723-8144

Area: Finance

Committee Members: Dr. Sudheer Chava (Chair), Dr. Manasa Gopal, Dr. Heather Tookes (Yale University), Dr. Rohan Ganduri (Emory University)

Title: Essays on Household Finance, FinTech, and Entrepreneurship

Dissertation Overview:

Essay 1: Impact of Marketplace Lending on Consumers’ Future Borrowing Capacities and Borrowing Outcomes

Using comprehensive credit bureau data, we document that consumers who borrow from marketplace lending (MPL) platforms have lower credit scores and higher default rates in the long run relative to observably similar applicants for bank loans. The long-run credit scores and default rates of MPL borrowers are especially worse when the MPL platforms provide less information to MPL investors, when MPL borrowers are benchmarked against relationship bank borrowers, and for one-time MPL borrowers as compared to repeat MPL borrowers. Overall, our results suggest that MPL lenders face greater information asymmetries with respect to their borrowers than traditional banks.

Essay 2: Gender and Access to Credit Cards

Using unique credit bureau data on first-time credit card borrowers across the U.S., we find that women are 30% more likely than men to open a retail credit card as opposed to a general-purpose credit card when they first access the credit card market. This difference is not explained by observable credit quality, the timing of credit card opening, location, and other observable individual characteristics. This gender difference in the propensity to open retail cards is smaller among consumers with more education and credit-related experience, and is driven by the relatively greater application rates for retail cards (as opposed to approval rates) by women. This initial gender difference in obtaining a retail card is further associated with a gender gap in future credit limits, balances, defaults, and credit scores. Overall, our findings highlight how individuals access the credit card market and who they bank with can have a lasting impact on their credit outcomes.

Essay 3: The Dark Side of Entrepreneurship

We document the long-term negative consequences of entrepreneurship on entrepreneurs' personal credit. After starting a business, entrepreneurs significantly increase their personal debt and experience an 18.93% increase in default rates and a 38.10% increase in personal bankruptcy filings compared to observably similar non-entrepreneurs. This effect is long-term, with defaults and bankruptcies staying high even five years after the business start. Lower entry barriers to entrepreneurship through business-friendly state policies are associated with the entry of worse entrepreneurs and higher personal costs for entrepreneurs. The increase in personal borrowing, particularly high-cost non-mortgage borrowing is associated with higher personal costs for entrepreneurs. Our results suggest the costs of entrepreneurship may outweigh the benefits of increased income demonstrated in the prior literature.

Essay 4: Leaving Them Hanging:  Student Loan Forbearance, Distressed Borrowers, and Their Lenders

Multiple extensions of the federal student loan forbearance program since March 2020 resulted in a temporary payment pause that has lasted more than 3 years. We examine the impact of this long-term forbearance on the evolution of borrowing by distressed individuals. We observe substantial increases in credit scores within six months of forbearance. This credit score improvement is followed by increases in credit limits and new credit cards that have allowed distressed borrowers to take on 11.6% more credit card debt relative to student borrowers whose loans were not in forbearance. This credit card borrowing is increasing and is being supplied mainly by banks, through both new and existing cards. We also see an uptick of 5.44% in auto loans, and significantly less total mortgage debt (driven by new mortgages). Auto loans are primarily driven by new auto loans, with non-banks serving as the most significant suppliers of new auto debt. As credit card and auto borrowing continue to increase, distressed borrowers in forbearance are beginning to default on their non-student debt at higher rates, exposing lenders to losses. Moreover, after 3 years of forbearance, financially vulnerable federal student loan borrowers’ student loan balances are 12.2% higher than vulnerable borrowers whose student loans are not in forbearance. If forbearance is lifted, our results suggest that the extended breathing room that the program allowed may accelerate post-forbearance financial distress.