Competition and Favoritism in Bank Loan Markets

2018 AEA meeting paper, Philadelphia

28 Pages Posted: 28 Nov 2017 Last revised: 2 Jun 2020

See all articles by Hua Cheng

Hua Cheng

Nankai University - School of Finance; University of Texas at Austin

Xue Li

University of Missouri at Columbia

Yan Dong

Southwestern University of Finance and Economics (SWUFE)

Shusen Qi

Xiamen University - School of Management

Date Written: September 1, 2017

Abstract

This paper analyzes costly favoritism related to physical attractiveness and gender in bank loan markets using a market structure-based method. The rationale is that a concentrated market provides more space for loan officers to discriminate against a certain group of borrowers. Using several unique datasets and online maps containing information on market structure and household finance, we find that loan officers prefer good-looking people and males in relatively risky commercial/industrial loan markets. On the other hand, females and especially young good-looking females have an advantage in mortgage loan markets. Although the disadvantage of bearing and raising children cannot be easily disentangled from discrimination in labor markets, it does not pose an issue in mortgage loan markets. We interpret these different patterns of favoritism as a result of differential risk levels associated with the two types of loans.

Keywords: market structure; bank loan; favoritism; discrimination; beauty; gender

Suggested Citation

Cheng, Hua and Li, Xue and Dong, Yan and Qi, Shusen, Competition and Favoritism in Bank Loan Markets (September 1, 2017). 2018 AEA meeting paper, Philadelphia , Available at SSRN: https://ssrn.com/abstract=3076414 or http://dx.doi.org/10.2139/ssrn.3076414

Hua Cheng (Contact Author)

Nankai University - School of Finance ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Xue Li

University of Missouri at Columbia ( email )

332 Cornell Hall
Columbia, MO Columbia 65211
United States

Yan Dong

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Shusen Qi

Xiamen University - School of Management ( email )

No.422 Siming South Road
Xiamen, Fujian 361005
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
140
Abstract Views
599
rank
228,459
PlumX Metrics