Featured Work
Feb 1, 2025
Uday Rajan
| Working Paper No. 00148-00
Data Regulation in Credit Markets
We study a credit market in which lending decisions depend on a borrower's digital profile, and the borrower can manipulate their digital profile. When the borrower observes the amount of data collected by the lender, manipulation increases as the lender acquires more data. Such manipulation worsens both the quality of the lender's data and its lending decisions. As a result, the lender endogenously limits its...
Apr 9, 2019
FinTech Disruption, Payment Data, and Bank Information
We study the impact of FinTech competition on a monopolist bank that bundles payment processing and lending. In our model, consumers' payment data contain information about their credit quality. This information is valuable to the bank when making loans. Surprisingly, under mild conditions, consumers in the loan market also benefit ex ante from the bank being informed. The bank internalizes the value of this information...
Feb 28, 2018
Uday Rajan
| Working Paper No. 00003-00
Credit Ratings: Strategic Issuer Disclosure and Optimal Screening
We study a model in which an issuer can manipulate information obtained by a credit rating agency (CRA) seeking to screen and rate its financial claim. Better CRA screening leads to a lower probability of obtaining a high rating but makes a high rating more valuable. Over an intermediate range of manipulation cost, improving screening quality can lead to more manipulation, dampening the CRA's incentive...
Feb 28, 2018
Uday Rajan
| Working Paper No. 00012-00
Contracting on Credit Ratings: Adding Value to Public Information
We provide a novel interpretation of the role of credit ratings when contracts between investors and portfolio managers are incomplete. In our model, a credit rating on a bond provides a verifiable signal about an unverifiable state. We show that the rating will be contracted on only if it is sufficiently precise. Moderately precise ratings lead to wage contracts, and highly precise ones to contracts...
