Essay I

Spillover Effects of CSR Disclosure Regulations across Lending Relationships

This paper examines whether and how CSR disclosure regulations imposed on banks generate spillover effects along the lending channel. I use a setting of U.S. firms borrowing from non-U.S. banks and exploit the staggered adoption of CSR disclosure regulations in banks’ home countries. I find that exposed borrowers that depend on affected banks improve their CSR performance following the disclosure mandate. The effects are stronger when a disclosure regulation induces a greater increase in the amount of new and hard information provided by banks, and when the lending relationship is more important for a borrowing firm. Furthermore, exposed borrowers with better CSR performance obtain more favorable loan t...[ Read more ]

Essay I

Spillover Effects of CSR Disclosure Regulations across Lending Relationships

This paper examines whether and how CSR disclosure regulations imposed on banks generate spillover effects along the lending channel. I use a setting of U.S. firms borrowing from non-U.S. banks and exploit the staggered adoption of CSR disclosure regulations in banks’ home countries. I find that exposed borrowers that depend on affected banks improve their CSR performance following the disclosure mandate. The effects are stronger when a disclosure regulation induces a greater increase in the amount of new and hard information provided by banks, and when the lending relationship is more important for a borrowing firm. Furthermore, exposed borrowers with better CSR performance obtain more favorable loan terms and are more likely to maintain their relationship with the affected banks. Collectively, this study documents the role of lending relationships in transmitting the effect of CSR disclosure regulations from banks to borrowing firms.

Essay II

Learning from Peers: Evidence from Disclosure of Consumer Complaints

The Consumer Financial Protection Bureau (CFPB) released a database of consumer complaints against banks under its supervision in 2013. This paper examines how rival banks that are not supervised by the CFPB react to this disclosure. We find that after the disclosure, rival banks exhibit a greater increase in mortgage approval rates in markets with more intensive complaints regarding the mortgages of CFPB-supervised banks. The effect is stronger when there is less information on CFPB-supervised banks’ local operations, when the complaints are more informative, and when the rival banks are better able to process the disclosures. The findings suggest that rival banks learn from the disclosures about peers’ operational deficiencies in local markets and thereby make aggressive lending decisions. This evidence supports the learning-from-peers channel, through which the disclosure regulation imposes real effects.