Topic:Missing Repayments on Haze Days:Evidence from China

Lecturer:Jianwen Li

Jianwen Li, an associate researcher at the School of Economics, Shandong University. His research interests include financial technology and big data analysis. He has published more than 10 academic papers in journals such as Journal of Banking& Finance, International Review of Finance, and World Economy, and presided over Humanities and Social science projects of the Ministry of Education and Youth projects of Natural Science Foundation of Shandong Province.

Abstract:

This study examines the impact of air pollution on a frequent financial decision that is cognitively less demanding. Based on 259,018 repayment records from a leading P2P lending platform in China, we find that borrowers are more likely to miss their repayments when the scheduled repayment days witness heavier air pollution. Deterioration of air quality from "excellent" to "severely polluted" is associated with an increase in delinquency rate by 155.6 basis points (12.4%) after controlling for city-by-yed-month, date, and loan fixed effects, as well as for local weather conditions. Instrumental variable estimates based on pollution transport by winds show similar results. The increased incidence of delinquency is likely to be explained by pollution-induced "behavioral" mistakes rather than borrowers' weaker financial position or non-financial frictions. However,pollution-induced delinquency events reduce borrowers'credit ratings and success rates of future loan applications,with the effect as large as that due to delinquencies unlikely driven by pollution, implying a misallocation of credit. We also document a similar delinquency response using an alternative dataset of mortgage repayments.

Time:12:15-13:15p.m,June 20,2024

Venue:B321,Zhixin Building,Central Campus