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Angry Borrowers: Negative Reciprocity in a Financial Market

The authors examine the consequences of an intrusive debt-collection tactic that targets delinquent borrowers’ social circles. Their identification strategy relies on the fact that some of the delinquent loans are not worked on due to collection agents’ excessive workload. The authors show that this tactic backfires and increases the borrowers’ default rate by 5.9 to 14.3 percentage points. Male borrowers and borrowers with better credit respond more strongly. Moreover, the effect is concentrated in the period when this collection practice was emerging and likely unexpected. These findings are consistent with the negative reciprocity interpretation: angered borrowers retaliate by defaulting on their loans.

18
Nov
2021
Thursday

Session Chair: Bohui ZHANG
Executive Associate Dean, Presidential Chair Professor of Finance; Director of the Center for FinTech and Social Finance, Co-director of MSc in Data Science Programme, Shenzhen Finance Institute, Chinese University of Hong Kong, Shenzhen

10:00 am
Angry Borrowers: Negative Reciprocity in a Financial Market

Hongjun YAN, Professor of Finance, Chair and Director of Richard H. Driehaus Center for Behavioral Finance, Department of Finance & Real Estate, DePaul University

Co-authors:
Li LIAO, Executive Associate Dean, Chair Professor of Finance of PBC School of Finance, Tsinghua University
Zhengwei WANG, Deputy Secretary of the Party Committee, Associate Dean, Associate Professor of PBC School of Finance, Tsinghua University
Jun YANG, Co-Chair, Department of Finance; Director, the Institute for Corporate Governance; Conrad Prebys Professor of Finance, Kelley School of Business, Indiana University
Congyi ZHOU, Research Assistant, China Center for Financial Research, Tsinghua University
10:25 am
Discussion
Discussant:
Utpal BHATTACHARYA, Chair Professor, Department of Finance, Hong Kong University of Science and Technology
10:50 am
Q&A
11:10 am
Updated 25 Nov 2021

Speakers

  • Hongjun YAN

    Hongjun YAN

     

    Chair and Director of Richard H. Driehaus Center for Behavioral Finance, Department of Finance & Real Estate, DePaul University

    Hongjun Yan is the Richard H. Driehaus Chair in Behavioral Finance at DePaul University. His research focuses on asset pricing in the presence of frictions and behavioral finance. His studies have been published in the American Economic Review: Insights, Review of Economic Studies, Review of Financial Studies, Journal of Financial Economics, and Journal of Monetary Economics, among other journals.

    He is the winner of the NASDAQ OMX Award for the Best Paper on Asset Pricing at the Western Finance Association's 2011 conference, and the Best Paper Award at the 2020 GSU-RFS FinTech Conference. Before joining DePaul, he taught at the Yale School of Management from 2005 to 2015, and at Rutgers University from 2015 to 2016. He has a PhD in finance from London Business School.

  • Utpal BHATTACHARYA

    Utpal BHATTACHARYA

     

    Chair Professor, Department of Finance, Hong Kong University of Science and Technology

    Utpal Bhattacharya'sresearch is about the dark side of financial markets. He believes, with apologies to Thomas Jefferson, that "the price of capitalism is eternal vigilance."

    Professor Bhattacharya is the Executive Editor of Financial Management, and was an Associate Editor of the Review of Financial Studies and the Journal of Financial Markets. His publications have appeared in top-tier finance journals like the Journal of Finance, Journal of Financial Economics, The Review of Financial Studies, Journal of Financial and Quantitative Analysis and the Journal of Business, top-tier accounting journals like The Accounting Review, and top-tier economics journals like the Journal of Economic Theory, Journal of Law and Economics and the Journal of Monetary Economics.

    Professor Bhattacharya's research has been featured in full-length stories more than a hundred times in various media across the world, including six times in the Economist. He wrote a satire about the legendary fraudster Madoff in the New York Times . He has been invited to present his research in 236 institutions in 35 countries in 5 continents. He wrote a report for and served as a member of the "Task Force to Modernize Securities Regulation in Canada" in 2006. He and his report were featured in a Canadian Broadcasting Corporation investigative story titled "Who Is Guarding Your Money" on November 23, 2008. On December 2, 2008, legislators in Ontario, Canada, discussed this report. On May 16, 2012, the Securities and Exchange Commission of the U.S. invited him to present the findings of his Journal of Finance paper that documents cross-subsidies in mutual fund families. He is now an official whistleblower.

    Prof. Bhattacharya is an excellent teacher. He was nominated for the Trustee Teaching Award by Indiana University five years in a row. He won in 2004 and 2008. In 2006, Business Week recognized him as a "prominent faculty." Prof. Bhattacharya teaches in a different country every summer. He has taught at top universities in Argentina, Brazil, China, Colombia, Finland, France, Germany, Holland, India, Indonesia, Ireland, Italy, Japan, Lithuania, Mexico, New Zealand, Portugal, Singapore, Slovenia, South Korea, Russia, Taiwan, Turkey, UK and the USA (Chicago, Duke and MIT.)

    His goal is to spread the gospel of honest finance to every corner of the globe.

  • Bohui ZHANG

    Bohui ZHANG

     

    Executive Associate Dean, Presidential Chair Professor of Finance; Director of the Center for FinTech and Social Finance, Co-director of MSc in Data Science Programme, Shenzhen Finance Institute, Chinese University of Hong Kong, Shenzhen

    Bohui Zhang is Executive Associate Dean of the School of Management and Economics, and Presidential Chair Professor of Finance at the Chinese University of Hong Kong, Shenzhen. He is also the Director of the Center for FinTech and Social Finance, Director of M.Sc. in Data Science, and Associate Director of Shenzhen Institute of Data Economy. Before joining CUHK Shenzhen, he was the professor of finance at UNSW Business School, UNSW Sydney, and the associate director of the Institute of Global Finance.

    He studies the role of information intermediaries on capital markets, Chinese and foreign capital markets, and Fintech. His papers have been accepted for publication in the global top-tier finance, accounting, and business journals such as the Review of Financial Studies, Journal of Financial Economics, Journal of Accounting Research, Management Science, Journal of Financial Quantitative and Analysis, Journal of International Business Studies, Review of Finance, Journal of Banking and Finance, Journal of Corporate Finance, Journal of Financial Markets, and Journal of International Money and Finance.

    He has also been awarded with research grants from Australian Research Council, the Centre for International Finance and Regulation, Australian School of Business, National Natural Science Foundation of China, and best paper prizes from MIT Asia Conference in Accounting, the Annual Conference on Asia-Pacific Financial Markets of the Korean Securities Association, the Chinese Finance Association Best Paper Symposium, the China Finance Annual Meeting, the Asian Finance Association Conference, China International Conference in Finance, and the Northern Finance Association Conference.

    He has served as an ad hoc referee for over 30 academic journals such as Journal of Finance, Review of Financial Studies, Journal of Accounting Research, Accounting Review, and Management Science. He is the Associate Editor of Corporate Governance: An International Review, Financial Review, Asia-Pacific Journal of Accounting & Economics, and Asia-Pacific Journal of Financial Studies.

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Session Format

Each session lasts for 1 hour 10 minutes (25 minutes for the author, 25 minutes for the discussant and 20 minutes for participants' Q&A). Sessions will be recorded and posted on ABFER's web, except in cases where speakers or discussants request us not to.

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Agenda