The Journal of Finance

Information Disclosure, Cognitive Biases, and Payday Borrowing

Published: 11/14/2011   |   DOI: 10.1111/j.1540-6261.2011.01698.x

MARIANNE BERTRAND, ADAIR MORSE

Can psychology‐guided information disclosure induce borrowers to lower their use of high‐cost debt? In a field experiment at payday stores, we find that information that makes people think less narrowly (over time) about finance costs results in less borrowing. In particular, reinforcing the adding‐up dollar fees incurred when rolling over loans reduces the take‐up of future payday loans by 11% in the subsequent 4 months. Although we remain agnostic as to the overall sufficiency of better disclosure policy to “remedy” payday borrowing, we cast the 11% reduction in borrowing in light of the relative low cost of this policy.

Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985

Published: 03/20/2007   |   DOI: 10.1111/j.1540-6261.2007.01218.x

MARIANNE BERTRAND, ANTOINETTE SCHOAR, DAVID THESMAR

We investigate how the deregulation of the French banking industry in the 1980s affected the real behavior of firms and the structure and dynamics of product markets. Following deregulation, banks are less willing to bail out poorly performing firms and firms in the more bank‐dependent sectors are more likely to undertake restructuring activities. At the industry level, we observe an increase in asset and job reallocation, an improvement in allocative efficiency across firms, and a decline in concentration. Overall, these findings support the view that a more efficient banking sector helps foster a Schumpeterian process of “creative destruction.”