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Data vs Collateral

The use of massive amounts of data by large technology firms (big techs) to assess firms’ creditworthiness could reduce the need for collateral in solving asymmetric information problems in credit markets. Using a unique dataset of more than two million Chinese firms that received credit from both an important big tech firm (Ant Group) and traditional commercial banks, this paper investigates how different forms of credit correlate with local economic activity, house prices and firm characteristics. The authors find that big tech credit does not correlate with local business conditions and house prices when controlling for demand factors, but reacts strongly to changes in firm characteristics, such as transaction volumes and network scores used to calculate firm credit ratings. By contrast, both secured and unsecured bank credit react significantly to local house prices, which incorporate useful information on the environment in which clients operate and on their creditworthiness. This evidence implies that a greater use of big tech credit – granted on the basis of machine learning and big data – could reduce the importance of collateral in credit markets and potentially weaken the financial accelerator mechanism.

16
Sep
2021
Thursday

Session Chair: Jun PAN
Professor of Finance, Shanghai Advanced Institute of Finance (SAIF), Shanghai Jiao Tong University and Senior Fellow, ABFER

10:00 am
Data vs Collateral

Yiping HUANG, Sinar Mas Chair Professor of Finance of Economics, Deputy Dean of the National School of Development, and Director of the Institute of Digital Finance, Peking University

Co-authors:
Leonardo GAMBACORTA, Head of Innovation and the Digital Economy, Monetary and Economic Department, Bank for International Settlements
Zhenhua LI, Executive Director, Ant Group Research Institute
Han QIU, Economist, Bank for International Settlements
Shu CHEN, Algorithm Engineer, Ant Group
10:25 am
Discussion
Discussant:
Wei JIANG, Arthur F. Burns Professor of Free and Competitive Enterprise, Columbia Business School, Finance & Economics Division, Columbia University
10:50 am
Q&A
11:10 am


Updated 20 Sep 2021

Speakers

  • Yiping HUANG

    Yiping HUANG

     

    Sinar Mas Chair Professor of Finance of Economics, Deputy Dean of the National School of Development, and Director of the Institute of Digital Finance, Peking University

    Huang Yiping is Sinar Mas Chair Professor of Finance of Economics, Deputy Dean of the National School of Development, and Director of the Institute of Digital Finance, the Peking University. He served as a member of the Monetary Policy Committee at the People’s Bank of China between June 2015 and June 2018. Currently, he is a member of the External Advisory Group on Surveilance of the International Monetary Fund, and Research Fellow at the Financial Research Center of the Counselors’ Office of the State Council. He also serves as Chairman of the Academic Committee of China Finance 40 Forum, and a member of Chinese Economists 50 Forum. He is Editor of China Economic Journal and an Associate Editor of Asian Economic Policy Review. His research areas include macro economy, financial market and rural development.

    Previously, he was a policy analyst at the Research Center for Rural Development of the State Council, research fellow and senior lecturer of economics at the Australian National University, General Mills International Visiting Professor of Economics and Finance at the Columbia Business School, Managing Director and Chief Asia Economist for Citigroup, Managing Director and Chief Economist for Emerging Asia for Barclays, and an Independent Director of China Life Insurance Ltd, Minmetal Trust Ltd and Mybank.

    Prof Huang received his Bachelor of Agricultural Economics from Zhejiang Agricultural University, Master of Economics from Renmin University of China and PhD in Economics from Australian National University.

  • Wei JIANG

    Wei JIANG

     

    Arthur F. Burns Professor of Free and Competitive Enterprise, Columbia Business School, Finance & Economics Division, Columbia University

    Wei Jiang is Arthur F. Burns Professor of Free and Competitive Enterprise in the Finance and Economics Division. She is also a Senior Fellow at the Program on Corporate Governance at Harvard Law School, a Research Associate of the NBER—Law and Economics, and a member of the Committee on Capital Market Regulation.
    Professor Jiang's main research interests lie in corporate governance, institutional investors, and technology and financial markets. She pioneered research in hedge fund activism. She has published extensively in top economics, finance, and law journals, and her research has been frequently featured in major media, including the Wall Street Journal, Economist, Institutional Investors, Money, Fortune, Business Week, New York Times and Financial Times. She received numerous awards for research excellence, including the Smith-Breeden and DFA Distinguished Paper Prizes from the Journal of Finance, the Michael J. Brennan Best Paper Award from the Review of Financial Studies, and the Jensen Prize from the Journal of Financial Economics, as well as the best paper prizes from the Western Finance Association, Chicago Quantitative Alliance, UK Inquire, the Q-Group, and the IRRC Institute. Previously she served as an editor of the Review of Financial Studies, a Finance Department Editor at Management Science and an Associate Editor at the Journal of Finance.

    Professor Jiang has taught courses in Corporate Finance, Corporate Governance, Activist Investing, Empirical Methods in Finance Research, and Panel Data Econometrics in the Master, MBA/EMBA, and Ph.D. programs, and has received numerous teaching excellence awards. She was the Vice Dean for Curriculum and Instruction at Columbia Business School from 2016 to 2019.

    Professor Jiang received her B.A. and M.A. in international economics from Fudan University (China), and Ph.D. in economics from the University of Chicago in 2001.

  • Jun PAN

    Jun PAN

     

    Professor of Finance, Shanghai Advanced Institute of Finance (SAIF), Shanghai Jiao Tong University and Senior Fellow, ABFER

    Jun Pan is currently a Professor of Finance and SAIF Chair Professor at Shanghai Advanced Institute of Finance (SAIF), Shanghai Jiao Tong University. Prior to joining SAIF in 2019, she was the School of Management Distinguished Professor of Finance and Professor of Finance at MIT Sloan School of Management. Jun has a B.S. degree in Physics from Shanghai Jiao Tong University, a Ph.D. in Physics from New York University, and a Ph.D. in Finance from Stanford University.

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Session Format

Each session lasts for 1 hour 10 minutes (25 minutes for the author, 25 minutes for the discussant and 20 minutes for participants' Q&A). Sessions will be recorded and posted on ABFER's web, except in cases where speakers or discussants request us not to.

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Agenda