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Using proprietary loan screening data, we document that loan officers engage in “attention discrimination”: they exert less effort reviewing ex-ante disadvantage applicants, leading to higher rejection rates than otherwise justified by those applicants’ credit quality. Attention discrimination increases with the officers’ time constraints induced by quasi-random workload variations. When officer workload rises from the bottom to the top decile, they devote 70% less time to disadvantaged applicants, and the approval rate for those applicants declines by three-fifths. Our results indicate that attention constraints magnify discrimination, which provides policy implications about how to reduce discrimination in practice.

We study the relationship between banks' IT capabilities and their ability to serve customers during the demand shock for digital banking services generated by the COVID-19 pandemic. Amid mobility restrictions, banks with better IT experience larger reductions in physical branch visits and larger increases in website traffic, implying a larger shift to digital banking. They also exhibit shorter reaction times in mentioning COVID-19 on their websites. Banks with better IT originate more PPP loans, especially in areas with more severe COVID-19 outbreaks, higher levels of internet use, and higher bank competition. They also attract more deposits during the pandemic. Firms more exposed to COVID-19 are more likely to switch to higher-IT banks, while banks more exposed to it are more likely to upgrade their IT.

Women’s weak bargaining power against spouses can be a hurdle to their entrepreneurship opportunities. By utilizing the state- and time-varying divorce laws in the U.S., we find that female entrepreneurship increases significantly when the divorce laws give women stronger bargaining power. This effect mainly comes from an increase in survival rate by existing business owners. The results are more pronounced for the more entrepreneurial-type of occupations, and among women who ex ante face a less friendly social environment. Overall, our results provide the first evidence that intra-household bargaining power can be an important but unstudied factor for female entrepreneurship.

We examine how investor demand for leverage shapes asset management fees. In our model, investors' leverage demand generates a cross-section of positive fees even if all managers produce zero risk-adjusted returns. We find support for the model's novel predictions in the sample of the U.S. equity mutual funds: (1) fees increase in fund market beta precisely for beta larger than one; (2) this relation becomes stronger when leverage constraints tighten; and (3) low net alphas are especially common among high-beta funds. These results suggest that asset managers can earn fees above their risk-adjusted returns for providing their investors with leverage.

Adverse housing market events can affect credit conditions not only by hurting the financial fundamentals of banks, but may also by changing the lending behaviors of individual loan officers. In this paper, we test the latter mechanism by analyzing loan-level mortgage applications from 2008 to 2016 and utilizing a distinctive setup in the home foreclosure process: foreclosure auctions are typically held live at the county courthouse, thus making loan officers working nearby more exposed to news about the county-wise foreclosures. By comparing lending outcomes across loan applications within the same county and across branches of the same bank, we find that mortgage lending standards are more stringent when the decisions are made in bank branches next to county courthouses, resulting in higher rejection rates and smaller approved loan size. Accordingly, aggregating at the branch level, credit supply is significantly tighter at bank branches next to the courthouses relative to other branches of the same bank within the same county. We show that these effects on lending decisions and credit supply increase in the county-wise foreclosure intensity and are especially pronounced among high-risk borrowers and for branches belonging to small-sized banks. Our results are not driven by fundamental differences in borrower and branch characteristics of neighborhoods next to the courthouses and remain robust in a matched sample of branches and loan applications. Overall, our findings provide micro-level evidence that adverse news can have significant impacts on credit market outcomes by changing the risk preferences and beliefs of individual financial decision makers.