Essays on banking, capital markets, and FinTech
Creators: name: Zou, Xuan
Publisher: name: No Publisher Supplied
Year: 2020

description: This dissertation focuses on issues of banking, capital markets, and FinTech in China and the U.S. The first chapter discusses the slow recovery of small business lending in the U.S. after 2008 financial crisis. I provide one mechanism for how regulatory burden imposed by Dodd-Frank Act of 2010 and the regulatory relief plan in 2014 impacted the incentives for banks lending to small businesses. The second chapter investigates how the new investors contributed to the stock market bubbles in 2007 and 2015 in China. The third chapter studies the adoption of mobile payment in rural China. The first chapter contributes to the continuing debate on the costs and benefits of the Dodd-Frank Act of 2010, focusing on small business loans. Instead of attempting to directly measure the costs and benefits, I propose an alternative approach, measuring how the new regulations altered the capital market incentives for bank lending to small businesses. The events triggering the market's response were (1) the passage of the Dodd-Frank Act of 2010 and (2) the regulatory relief plan announced in 2015. By matching the Federal Reserve's Call Reports, Summary of Deposits, and Y9C Reports with Compustat data, I constructed a dataset of the top-tier publicly traded bank holding companies, spanning the years 2001--2017 to identify the market effects of the Dodd-Frank Act. Overall, the capital market responded by increasing the incentives for community banks to expand their small business loans and for large banks to reduce theirs. After 2010, large banks' lending recovered so sluggish that in spite of increased incentives for community banks to increase lending following the Federal Reserve's 2015 regulatory relief plan, the volume of newly originated small business loans never fully recovered from the recession. The second chapter studies the phenomenon that naïve investors are attracted to the market as asset prices soar. This chapter presents previously unused data on the aggregate number of newly opened brokerage accounts in China and investigates the role of new investors in bubble formation. I find that new investors, attracted by the intensive trading activities of others, drove the Chinese stock market bubbles in 2007 and 2015, supporting the Greater Fool theory of bubbles. Their insensitive to the stock price changes during the bubble periods made them more likely to be the ``greater fools." Applying the method of residual orthogonalization , I build a data-driven structural model system, where shocks from the new accounts variable could explain 40-55\% of Chinese stock return variations. The third chapter focuses on the acceptance of mobile payment in rural China. Together with my coauthor, I analyze a large-scale survey data which provides detailed household information and the usage of mobile payment in rural China. By applying a hurdle model with 2SLS, we find that consumers who have better access to bank services are more likely to accept mobile payment as they might have gained financial literacy. However, after adoption, the less frequently consumers visit banks due to distance or social reasons, the more they use mobile payment to supplement bank services. Younger, better educated households with higher income and more smart phones are more likely to adopt and use mobile payment. At aggregate level, regions with higher acceptance level of mobile payment enjoy higher GDP with better development in bank and FinTech services.