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The Big Tech Lending Model

By comparing uncollateralized business loans made by a big tech lending program with conventional bank loans, the authors find that big tech loans tend to be smaller and have higher interest rates and that borrowers of big tech loans tend to repay far before maturity and borrow more frequently. This lending program channels credit to small businesses underserved by banks without incurring excessive risks (even during the COVID-19 crisis). The authors highlight several mechanisms—screening, monitoring, convenience, and high interest rates—which work together to serve borrowers’ short-term liquidity rather than long-term financing needs, thereby limiting the lender’s risk exposure.


20
Oct
2022
Thursday

Session Chair: Zhiguo HE
Fuji Bank and Heller Professor of Finance and Jeuck Faculty Fellow, Booth School of Business, University of Chicago and Senior Fellow, ABFER

10:00 am
The Big Tech Lending Model

Wei XIONG, John H. Scully '66 Professor in Finance and Professor of Economics, Department of Economics and Bendheim Center for Finance, Princeton University and Senior Fellow, ABFER

Co-authors:
Lei LIU, Institute of Economics, Chinese Academy of Social Sciences
Guangli LU, Assistant Professor in Finance, Chinese University of Hong Kong - Shenzhen
10:25 am
Discussion
Discussant:
Yao ZENG, Assistant Professor of Finance, The Wharton School, University of Pennsylvania
10:50 am
Q&A
11:10 am


Updated 21 Oct 2022

Speakers

  • Wei XIONG

    Wei XIONG

     

    John H. Scully '66 Professor in Finance and Professor of Economics, Department of Economics and Bendheim Center for Finance, Princeton University

    Wei XIONG is John H. Scully '66 Professor in Finance and Professor of Economics in the Department of Economics and Bendheim Center for Finance, Princeton University. He is also Academic Dean of School of Management and Economics, Chinese University of Hong Kong, Shenzhen, as well as Research Associate of the National Bureau of Economic Research. His research interests center on capital market imperfections, behavioral finance, digital economy, and China’s financial system. He has served as Co-Editor of Journal of Finance (the flagship journal of American Finance Association) from 2016-2022. He has received various awards, including 2018 China Economics Prize, 2014 Inaugural Sun Yefang Financial Innovation Award, 2013 NASDAQ OMX Award by Western Finance Association, and 2012 Smith Breeden Award (first prize) by American Finance Association. He received his Ph.D. in finance from Duke University in 2001, M.A. in physics from Columbia University in 1995, and B.S. in physics from University of Science and Technology of China in 1993.

  • Yao ZENG

    Yao ZENG

     

    Assistant Professor of Finance, Wharton School, University of Pennsylvania

    Yao Zeng is an Assistant Professor of Finance at the Wharton School, the University of Pennsylvania, and also a policy consultant to the Financial Stability Board. He works on the intersection of asset pricing and corporate finance with a focus on financial intermediation. His current research explores the interaction between banks and various non-banks including mutual funds, ETFs, and various FinTech companies, and has been published in leading journals including the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies. He received his Ph.D. in Economics from Harvard University in 2016.

  • Zhiguo HE

    Zhiguo HE

     

    Fuji Bank and Heller Professor of Finance and Jeuck Faculty Fellow, Booth School of Business, University of Chicago and Senior Fellow, ABFER

    Zhiguo He is interested in the implications of agency frictions and debt maturities in financial markets and macroeconomics with a special focus on contract theory and banking. His recent research focuses on the role of financial institutions in the 2007/08 global financial crisis. He is conducting academic research on Chinese financial markets including the stock market, local government debt, shadow banking, and interbank markets together with recent regulation changes. Professor He has also been writing academic articles on new progress in the area of cryptocurrency and blockchains.

    His research has been published in leading academic journals including the American Economic Review, Econometrica, Review of Economic Studies, Journal of Finance, Review of Financial Studies, Journal of Financial Economics, American Economic Journal: Macroeconomics, and Management Science. He has been an associate editor for the Review of Financial Studies and Management Science and currently serves as an associate editor for the Journal of Finance. He serves as the guest editor of the Review of Finance for the “Special Issue on China” in 2020-2021, and will be serving as the Editor for the Review of Asset Pricing Studies starting July 2021.

    Professor He received his bachelor and master degrees from the School of Economics and Management at Tsinghua University before receiving his PhD from the Kellogg School of Management at Northwestern University in 2008. He has been named a 2014 Alfred P. Sloan Research Fellow, and has won numerous awards for his outstanding scholastic record, including the Lehman Brothers Fellowship for Research Excellence in Finance in 2007, the Swiss Finance Institute Outstanding Paper Award in 2012, the Smith-Breeden First Prize in 2012, and the Brattle Group First Prize in 2014. Before joining the Chicago Booth faculty in 2008, he worked as a stock analyst at the China International Capital Corporation in Beijing in 2001 and visited the Bendheim Center for Finance at Princeton University as a post-doctoral fellow.

    In Autumn 2015 Professor He was the Dean’s distinguished visiting scholar at Stanford University, Graduate School of Business, and in winter 2020 he is a visiting professor of finance at Yale University, School of Management. In January 2020, he testified at U.S.-China Economic and Security Review Commission (USCC) Hearing on “China’s Quest for Capital: Motivations, Methods, and Implications.”

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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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