Abstract: Interest rate caps can lead to credit misallocation by restricting the accessibility of small-dollar loans. This study leverages a randomized controlled trial (RCT) implemented in California by a Fintech lender and its Utah bank partner to investigate this effect. The results show that borrowers have consistently high take-up rates after approval regardless of the small-dollar loan availability. High-risk borrowers self-select into smaller-dollar loans, and access to smaller loans can reduce their probability of default. Heterogeneity effect analysis suggests that borrowers with high financial fragility benefit more from removing interest rate caps on smaller-dollar loan access. The results suggest that because borrowers appear unable to manufacture smaller loans from larger ones, interest rate caps on small-dollar loans may increase fragile borrowers’ exposure to future adverse shocks.

 

with Amit Seru

Abstract: We investigate the influence of revolving patent lawyers—former patent examiners—on patent application outcomes. By examining randomly assigned patent applications handled by these lawyers, we find that revolving patent lawyers enhance patent application success. Intellectual property (IP) law firms employing these lawyers see higher approval rates, shorter examination times, fewer requests for further examination, and reduced future litigation risk. However, the average value of granted patents, as measured by future citations and KPSS, declines. Further marketplace analysis reveals that incumbent firms benefit more than startups, suggesting that incumbent firms may exploit relational rents through their connections with revolving IP law firms.

with Feifei Zhu
Abstract: We examine the impact of risk managers system on corporate lending practices at a commercial bank in China. Risk manager assignments at the branch level lead to improved loan performance, evidenced by higher initial ratings and a reduced likelihood of future rating deterioration. First-time borrowers benefit most from risk manager oversight, receiving loans with more favorable terms, including larger credit lines, lower interest rates, longer maturities, and reduced collateral requirements. These effects are particularly pronounced in inland regions and areas with weaker legal environment, suggesting that risk managers enhance loan outcomes by mitigating local relational rents. A subsequent textual analysis corroborates this mechanism.

Abstract: In this study, we combine textual analysis with the Becker (1957, 1993) outcome test to examine bias within the U.S. innovation system. By employing textual similarity measures, we develop a standardized approach to assess the potential value of patent applications. Leveraging the random assignment of patent examiners with varying degrees of leniency, we find that patent applications from female inventors and minority inventors tend to be approved with higher marginal values when reviewed by stricter examiners. These applications are frequently linked to well-established technological fields, such as pharmaceuticals, chemicals, and mechanical engineering. Response to initial rejection analysis implies that both discrimination and self-selection could jointly explain this bias.

 

Reference

Professor Gregor Matvos (Committee Chair)
Professor Scott Baker
Professor Filippo Mezzanotti
Professor Sean Higgins
Professor Amit Seru