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Finance and Society

Paper Session

Saturday, Jan. 3, 2026 8:00 AM - 10:00 AM (EST)

Philadelphia Marriott Downtown, Room 305
Hosted By: Econometric Society
  • Chair: Huan Tang, University of Pennsylvania

Data as Collateral: Open Banking for Small Business Lending

Tong Yu
,
Tsinghua University

Abstract

Open banking enables small businesses to share their bank financial data with potential lenders. I examine the effect of open banking on collateralization in small business lending. For identification, I exploit institutional features of the UK’s open banking policy that creates a discontinuity in firms’ eligibility to share data. Using a novel loan-level dataset covering the entire UK secured business loan market, I document that open banking eases the pledge of assets like accounts receivable and inventory. Firms eligible to share data are more likely to pledge such assets as collateral, thereby improving their access to credit. These effects are more pronounced for firms facing greater information asymmetry and those with greater information available to share. These findings highlight the role of open banking in reducing collateral constraints by mitigating information asymmetry.

The Dynamics of Labor Market Frictions, Input Substitution, and Corporate Investment

Sreedhar T. Bharath
,
Arizona State University
DuckKi Cho
,
University of Sydney
Michael Hertzel
,
Arizona State University

Abstract

Labor market frictions shape corporate investment by constraining firms’ ability to adapt to
labor cost shocks. We examine how structural shifts—driven by technological change, globalization,
union decline, and import competition—have altered firms’ investment responses to minimum
wage increases. Since the early 1980s, investment sensitivity to wage changes has declined from
strongly negative to economically insignificant. This pattern reflects greater input substitutability:
firms more exposed to automation, offshoring, or weaker labor institutions are better able to absorb
cost shocks. Our findings offer new insight into how evolving labor frictions affect capital
allocation and suggest broader implications for other corporate decisions.

The Impact of Climate Policies on Financial Markets: Evidence from the EU Carbon Border Adjustment Mechanism

Christoph Meinerding
,
Deutsche Bundesbank
Mengjie Shi
,
Deutsche Bundesbank
Yupu Zhang
,
University of Edinburgh Business School

Abstract

The introduction of the EU Carbon Border Adjustment Mechanism (CBAM) has triggered statistically significant negative stock market responses for firms within the EU. Comparing EU customers that have non-EU suppliers in CBAM-affected industries with their nontreated peers in the control group, we find an extra cumulative abnormal return of up to -1.3 percentage points over our main five-day event window around December 13, 2022. Furthermore, we document substantial anticipatory market responses reflecting updated beliefs about broader climate policy developments going forward. This paper is the first to provide empirical evidence of carbon border tax impacts on firm valuations through international supply chains. Our findings contribute to the understanding of climate policy transmission through international trade networks and inform the debate on stranded assets resulting from environmental regulations.

How Do Nonprofits Use Cash Windfalls? Evidence from $5B in Unrestricted Donations

Jennifer Walsh
,
Harvard University

Abstract

Donations to 501(c)(3)’s are increasingly given unrestricted due to concerns that restrictions on use unduly constrain nonprofits. I study the effect of such funding on recipients using a $5B sample of MacKenzie Scott’s gifts from 2020-2022 to 567 nonprofits. I find that, within two years of receiving the gift, nonprofits received 64% of the average gift in additional contributions and spent the entirety of the average gift compared to similar untreated nonprofits. After giving away 26% of new spending as charitable grants, recipients spent these funds proportionally to their previous activities. To rationalize these findings, I present a model of nonprofits maximizing charitable output subject to donation restrictions. Relative increases in grant giving suggest that nonprofit production has decreasing returns to scale. No change in the relative allocations to indirect costs and saving suggests that recipient nonprofits were not constrained by the “nonprofit starvation cycle.” Compensation of the highest paid employee increased by $20.9K (9%), average compensation of the next four highest paid individuals increased by $13.1K (13.6%), and average compensation of non-senior employees increased by $2.7K (5.8%). If the compensation increases were permanent but contribution crowd in was transient, the present value of executive compensation increased by $0.23 for every dollar of the gift and additional contributions.

Discussant(s)
Susan Cherry
,
University of Texas at Austin
Miao Ben Zhang
,
University of Southern California
Sangmin (Simon) Oh
,
University of Pennsylvania
Lea H. Stern
,
University of Washington
JEL Classifications
  • G20 - General