Learning from Peers: Evidence from Disclosure of Consumer Complaints

55 Pages Posted: 11 Jul 2023 Last revised: 15 Jul 2023

See all articles by Yiwei Dou

Yiwei Dou

New York University (NYU) - Department of Accounting

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

Guoman She

The University of Hong Kong - Faculty of Business and Economics

Lynn Linghuan Wang

The University of Hong Kong - Faculty of Business and Economics

Date Written: July 11, 2023

Abstract

In 2013, the U.S. Consumer Financial Protection Bureau released a database of consumer complaints filed against banks under its supervision (“CFPB banks”). We find that after the disclosure, rival banks exhibit a greater increase in mortgage approval rates in markets with more intensive mortgage complaints about CFPB banks. The effect is weaker when rivals have more expertise in the local market, are less concerned about credit risk due to mortgage sales, and locate in areas with more alternative information about the CFPB banks. The effect is concentrated in severe complaints and complaints related to loan underwriting practices. In addition to approving more loans, rivals also open more branches and are more likely to post a job opening in these markets. The findings suggest that these banks learn from the nonfinancial disclosures about operational deficiencies of peers (i.e., CFPB banks) in local markets, which alleviates their adverse
selection concern about expanding.

Keywords: Learning from peers, Disclosure, Consumer complaints, Mortgages, Competition

JEL Classification: D1, D8, G2, L1, M4

Suggested Citation

Dou, Yiwei and Hung, Mingyi and She, Guoman and Wang, Lynn Linghuan, Learning from Peers: Evidence from Disclosure of Consumer Complaints (July 11, 2023). Journal of Accounting and Economics, volume 77, issue 2-3, 2024 [10.1016/j.jacceco.2023.101620], HKUST Business School Research Paper No. 2023-115, Available at SSRN: https://ssrn.com/abstract=4506489 or http://dx.doi.org/10.1016/j.jacceco.2023.101620

Yiwei Dou

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street
Suite 10-180
New York, NY 10012
United States

Mingyi Hung (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Guoman She

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Lynn Linghuan Wang

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
Hong Kong

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