Award-winning research focuses on critical issues in financial industry

By: ISU Communications and Marketing Staff, ISU Communications and Marketing Staff
May 31, 2011

A conference at Indiana State University featured researchers presenting their award-winning papers about "emerging critical issues that affect financial services regulation," a conference official said.

The presenters, who received funding from Networks Financial Institute, spoke at the Financial Services Policy Reform Conference at ISU on May 16. NFI, an institute in the Scott College of Business at Indiana State, awarded funding to the presenters through two programs. The recipients presented their research findings, which was followed by discussion among policy experts and scholars in attendance.

"Each scholar provided insight on topics that are of critical importance today, either from a broad, theoretical perspective or directly on issues that policymakers are working to address," said John Tatom, director of research for NFI. "This initiative was designed to encourage and support research among emerging scholars."

Researchers Joanne W. Hsu, a doctoral candidate at the University of Michigan, and Ishani Tewari, a doctoral candidate at Brown University, were among the eight presenters. The two received Financial Services Dissertation Fellowship awards from NFI to study financial services policy and financial literacy, respectively. They said the fellowships allowed them to focus on their respective research projects while still in graduate school.

In her presentation, "Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy," Hsu explained her research, which found that women increase their financial literacy as their husbands get older and the women approach widowhood.

While people were aware of the gender gap regarding financial literacy, Hsu said that her research found that women are learning more, and explained the reasoning why.

"This is not something out of left field," Hsu said, "but it's an empirical fact that no one knew before."

Tewari gave a presentation on her research, "Home Sweet Home: Financial Development and Home Ownership." In the initiative, she examines the consequence of "improvements in credit markets, which happened via bank branching deregulation, for home ownership in the U.S. and especially for home ownership among lower and middle-income borrowers," she said.

She found that, in the 1980s and 1990s, the result was an increase in credit to lower-income borrowers, but it did not increase foreclosures or delinquencies.

Ironically, Tewari was researching the topic at a time when her findings were juxtaposed against the current housing crisis, which saw a historically high number of home foreclosures that has also impacted the economy.

"Research has shown that during the period that led up to the current crisis, loan screening technologies were used carelessly, resulting in bad loans," Tewari said. "But I think in the earlier time period that I investigate, when these technologies were emerging, they did help get credit to lower income borrowers but without the adverse consequences we see today."
The other presenters attending the conference received awards in NFI's National Competition for Research Papers on Financial Services Policy Reform. The awards were formally announced earlier this year.

Third place winner Irina Telyukova, assistant professor in the department of economics at the University of California, San Diego, presented her paper "Home Equity Withdrawal in Retirement," which she co-authored with Makoto Nakajima.

They focus on the retirement-saving puzzle, which is "the statement that a lot of households reach the end of their lifetimes with significant financial assets," Telyukova said. She said that, in their research, data suggests that retirees who are homeowners don't seem to expend their assets quickly, though the opposite is true for retirees who do not own their homes.

"The paper aims to quantify and analyze the many complex tradeoffs that retirees face when they make financial decisions. We are the first to focus on housing specifically, which is a key question since most people's wealth in retirement is in their homes," Telyukova added. "Retirees have to decide whether to own a home, stay in their home, whether to maintain it, whether to borrow against it ¬- all in the face of much uncertainty and the possible desire to bequeath wealth to their children. In our paper, we quantify all these possibly conflicting motives to arrive at a picture of how retired home owners differ from renters and what drives their decisions."

Contest winner William C. Gerken, assistant professor of finance at Auburn University, presented his paper, "Predicting Fraud by Investment Managers," which he co-wrote with Stephen G. Dimmock. In the research, they analyzed how well Securities and Exchange Commission disclosures can predict fraud. Their analysis found that fraud is "somewhat predictable," Gerken said.

"In the bigger picture, it also points out some of the shortcomings of the SEC's existing disclosures methods, and that has policy implications," Gerken said. "There are some ways that the SEC could improve access to this data that might help investors utilize this data a little bit better too."

Second place winner Martin Goetz, financial economist for the Federal Reserve Bank of Boston, also presented his paper, "Bank Organization, Market Structure and Risk Taking: Theory and Evidence from U.S. Commercial Banks," during the event. Several honorable mention award recipients presented their research as well.

Indiana State faculty members contributed to the event. Each presentation featured a discussant, which included several ISU professors, who summarized and critiqued the researchers' work and prompted discussions between the presenters and the audience.

The conversations led to additional recommendations that the presenters can use in the future, either in adding to their current papers or for future research, said Tatom, who was pleased with the event.

"We knew we had good papers, but we didn't know the presentations would be as good as they were," Tatom added. "They were excellent."

Photo: http://isuphoto.smugmug.com/photos/i-rfcqXSq/0/L/i-rfcqXSq-L.jpg (ISU/Tony Campbell)
William C. Gerken, assistant professor of finance at Auburn University, presented his paper, "Predicting Fraud by Investment Managers," which he co-wrote with Stephen G. Dimmock, at the Financial Services Policy Reform Conference at Indiana State University on May 16. Gerken's research paper won first place in a competition from Networks Financial Institute, an institute within the Scott College of Business at ISU.

Photo: http://isuphoto.smugmug.com/photos/i-Wb7WZMT/0/L/i-Wb7WZMT-L.jpg (ISU/Tony Campbell)
Ishani Tewari, a doctoral candidate at Brown University, discusses her research, "Home Sweet Home: Financial Development and Home Ownership" during the Financial Services Policy Reform Conference at Indiana State University on May 16. She received a Financial Services Dissertation Fellowship award from Networks Financial Institute, an institute in the Scott College of Business at ISU.

Contact: John Tatom, director of research, Networks Financial Institute, Indiana State University, 317.536.0281 ext. 712 or john.tatom@indstate.edu.

Writer: Austin Arceo, assistant director of media relations, Office of Communications and Marketing, Indiana State University, 812-237-3790 or austin.arceo-negrich@indstate.edu.

Story Highlights

Eight researchers who received awards from Networks Financial Institute, an institute in the Scott College of Business, presented their research at the Financial Services Policy Reform Conference in May.

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