We study competition and collaboration between a bank and a fintech firm that lend in the same market plagued by adverse selection. The bank has cheaper funding, whereas the fintech firm has better screening technology. Our innovation is to allow the bank to lend to the fintech, i.e., to finance its competitors. This partnership funding arrangement lowers the fintech’s funding costs and reduces the bank’s incentive to compete. We show that two lenders collaborate when the average quality of the borrower pool is low but compete when the quality gets high. While the fintech always benefits from partnership funding, the bank receives more profits only when the average quality is high, at the expense of higher interest rates the borrowers face.

How do expectation biases causally affect households’ financial decisions? We exploit a unique setting and study the repayment decision in solar loans, in which households borrow to purchase and install solar photovoltaic (PV) systems. Electricity production – the benefit that solar panels generate – primarily depends on sunshine duration. This creates exogenous within-person across-period variation in recent signals that borrowers observe and thereby expectations of future electricity production. We find that a one-standard-deviation decrease in sunshine duration in the week right before the repayment date leads to a 20.8% increase of delinquency, even though deviated past sunshine duration does not predict that in the future. Survey evidence shows that agents make more positive forecasts of future electricity production after experiencing longer sunshine duration in the past week. We examine a battery of alternative explanations and rule out mechanisms based on liquidity constraints and wealth effects.

Does stronger enforcement of intellectual property laws benefit domestic firms in emerging economies? The commonly accepted view suggests that stronger enforcement of intellectual property laws contributes to better firm performance by reducing imitation and infringement. We contend that the relationship between the enforcement of intellectual property laws and firm performance depends on the innovation capacity of affected firms. As many indigenous firms in emerging economies have less and lower quality intellectual property than their foreign peers, stronger enforcement of intellectual property laws could negatively influence domestic firms' performance in emerging economies. Using the ‘three-in-one trial’ reform of intellectual property law enforcement in China as a quasi-natural experiment, we investigate the impact of intellectual property law enforcement on the performance of Chinese listed manufacturing firms from 2011 to 2020. The results show that enforcement of intellectual property laws negatively influences firm performance. This negative effect is weaker for firms with a higher innovation capability and stronger for firms in industries with a high technology gap between domestic and foreign firms. The findings contribute to a more complete understanding of the relationship between the enforcement of intellectual property laws and firm performance.