Vanessa Gail Perry

Retailer power and supplier welfare

Abstract Whether retailers have become more powerful than manufacturers in recent years continues to be a burning question in the trade press and academic literature. Our research adds fresh fuel to the fire by looking at whether Wal-Mart, the largest retailer in the United States, has exerted power over its suppliers and squeezed them financially. Previous academic research on retailer power has looked largely at food stores, but we extend this perspective into nonfoods by using Compustat data as a source. Our analysis of these data indicates that the answer may be more complex than a simple yes or no. We find that Wal-Mart suppliers holding a small share of their respective markets do not perform relatively as well financially when they have Wal-Mart as one of their primary customers. However, large-share suppliers to Wal-Mart perform better than their large-share counterparts reporting retailers other than Wal-Mart as their primary customers. This indicates that suppliers who seek Wal-Mart’s wide market reach may derive benefits from using this association if it can be used to strengthen their market positions. Those that fail in this goal, however, may find their profits squeezed and do better by shifting their retail channel focus elsewhere.

Automated underwriting in mortgage lending: Good news for the underserved?

Abstract Automated underwriting (AU) systems have become the tool of choice in mortgage lending decisions. While these systems provide significant benefits to mortgage originators and investors, questions have been raised about their impact on underserved populations. The questions focus on the relative accuracy of AU compared with manual underwriting and whether AU has increased the flow of mortgage credit to underserved consumers. Using information from Freddie Macs Loan Prospector AU service, we provide statistics useful in examining these issues. The data strongly support our view that AU provides substantial benefits to consumers, particularly those at the margin of the underwriting decision. We find evidence that AU systems more accurately predict default than manual underwriters do. We also find evidence that this increased accuracy results in higher borrower approval rates, especially for underserved applicants.

Do mortgage rates vary by neighborhood? Implications for loan pricing and redlining

Abstract Using a nationally representative sample of conventional single-family mortgage loans that originated during 1992–1995 with detailed loan pricing information, this paper examines whether interest rates vary by neighborhood income and racial composition. The estimates suggest that borrowers financing homes in low- and moderate-income neighborhoods generally paid 2–4 basis points more for 30-year loans, but there was no difference for 15-year loans. Results by racial composition of the neighborhood were more mixed, with borrowers in predominately Hispanic and Asian neighborhoods paying slighting higher rates, while borrowers in predominately African–American neighborhoods occasionally paid slightly lower rates. Omitted variables could account for some of these differences. Overall, the small effects suggest that redlining is unlikely to be a factor, although no firm conclusions can be drawn.

Acculturation, microculture and banking: an analysis of Hispanic consumers in the USA

Purpose – The purpose of this paper is to show that having a bank account is an important precursor to participating in the US financial mainstream. However, about 24 percent of Hispanic households in the USA are unbanked. This study seeks to examine whether the use of banks among Hispanic consumers can be explained by acculturation and microcultural factors. Design/methodology/approach – The model proposes that having a checking or savings account is a function of acculturation, microculture, and demographics. Acculturation is measured in terms of length of time in the USA; plans to remain in the USA temporarily versus permanently; Spanish language use; and citizenship status. Microculture is measured by country of origin. Data used for this analysis were collected in a survey sponsored by a start‐up financial institution interested in targeting the Hispanic market. These data were collected in 2004 during telephone interviews with 1,000 Hispanic renters in major markets across the USA. Findings – More acculturated Hispanic consumers are more likely to have a bank account, regardless of income, and level of education. In addition, the propensity to have a bank account varies by country of origin. Practical implications – Marketers and policymakers should target less acculturated immigrants who view themselves as temporary US residents, and those who use Spanish primarily for communicating outside the home. Marketers should emphasize the safety and soundness of the US banking system and should accommodate needs for international funds transfers. Originality/value – The findings can help financial service providers and public policy makers to target a growing market segment.

Giving Credit Where Credit is Due: The Psychology of Credit Ratings

The purpose of this study is to examine the effect of personality on credit ratings, measured in terms of credit scores from actual credit reports. Personality is measured in terms of an individuals locus-of-control, which is the extent to which individuals attribute important outcomes to external forces outside of their control. Using survey data from a large, national sample of consumers, an individuals credit score is modeled as a function of financial knowledge and locus-of-control, in addition to demographic characteristics and situational factors. Findings suggest that consumers with higher levels of financial knowledge and consumers with an internal locus-of-control have higher credit scores than similarly situated consumers with low credit scores, even after controlling for income, education, and the incidence of negative external life events. In addition, the extent to which knowledge affects credit scores depends on whether an individual has an external vs. internal locus-of-control.

Living on the Other Side of the Tracks: An Investigation of Public Housing Stereotypes

Many ascribe to the concept of “home sweet home”; however, this is an increasingly elusive end state. The economic recession and depressed housing market have resulted in unprecedented numbers of displaced homeowners and an insufficient supply of affordable housing options. As a result of these circumstances, the homeless rate in the United States is at an all-time high, and many jurisdictions report long waiting lists for temporary shelters and subsidized, or “public,” housing. According to research, public housing is often stigmatized, and there are several widely held, negative stereotypes of public housing residents. The authors examine the perceptions of residents when the occupants are renters and the landlord is a governmental entity (i.e., public housing). The authors propose a conceptual model that examines public housing resident stereotypes based on perceivers’ prior knowledge, the propensity to seek out cultural diversity, and demographic characteristics. The findings from an experiment suggest that public housing stereotypes are a function of prior knowledge and diversity-seeking tendencies and that consumers’ diversity-seeking tendencies can be altered in response to certain external, situational stimuli. The authors discuss implications for public policy and consumer welfare.

Understanding the Fine Print: The Need for Effective Testing of Mandatory Mortgage Loan Disclosures

Prior research indicates that mandatory disclaimers increase consumer confusion and lead to inferior decisions. The authors examine the implications of these findings in the context of mandatory disclosures required by federal law for mortgage loan transactions. Research suggests that consumers can be confused when too much information is presented or disclosure information is too complex but falls short of concluding that all mandatory disclaimers increase consumer confusion and lead to inferior decisions. The literature lacks conclusive evidence of the effects of disclosures on decisions and outcomes, such as loan choice or performance, and research examining the role of disclosures in light of other social, contextual, or informational influences is scarce. Longitudinal, experimental evidence that controls for these factors is necessary to examine the effects of disclosures on decision quality. Better-designed research in this area could lead to significant improvements in public policy and consumer protection and result in a more efficient allocation of public resources.

Creditsmart© Research: A Study of Consumer Financial Knowledge and Implications for Social Marketing

This paper describes a corporate-sponsored research effort whose goal was to help consumers obtain and maintain good credit through consumer education. Freddie Mac in collaboration with five historically Black colleges and universities (HBCUs) and three national nonprofit consumer organizations sponsored this initiative, known as CreditSmart©, which involves research, curriculum development, and outreach. In order to inform the curriculum and outreach, the authors evaluate the effectiveness of learning about finances through formal, informal, and experiential sources. They also examine whether there are ethnic or cultural differences in these effects. The proposed model of consumer financial knowledge was tested using the 1999 Consumer Credit Survey (CCS) data collected from approximately 12,000 consumers. This dataset includes a variety of questions about childhood experiences with money, financial knowledge, attitudes, and experiences, as well as assets, debts, and demographic characteristics. Findings suggest that formal training and childhood financial experiences are significant predictors of financial knowledge across the sample population as a whole, while informal, word-of-mouth sources have a significant additional impact among African-American consumers. Implications for social marketing and consumer education are discussed.

Dreams and Taboos: Home Loan Advertising in the United States and Saudi Arabia

ABSTRACT Home ownership is important, complex, and influenced by culture. In the United States, home ownership is the American Dream, supported by an elaborate mortgage lending system. Home ownership is less common in Saudi Arabia because Islamic law prohibits both paying and charging interest—thus, mortgage loans have traditionally been considered taboo. Given these differing cultural values and orientations, an important research question becomes how do marketing communications differ when offering financial opportunities for dreams or taboos? A qualitative analysis of advertising messages reveals several themes. The “dream of home ownership” and “relationship” themes are common to both cultures. However, the manners in which these messages are articulated differ and appear derived from cultural values and communication styles. Further, in the United States the emphasis is on affordability of interest charges while religious validity is emphasized in Saudi ads. Implications for marketers are discussed.

Dog Parks and Coffee Shops: Faux Diversity and Consumption in Gentrifying Neighborhoods

The process of gentrification, whereby lower-income residents are replaced with higher-income ones (Glass 1964), has changed the composition and character of hundreds of urban neighborhoods in cities worldwide. These changes affect not only the physical landscape but also the diversity of the people who live there. This research explores diversity seeking, consumption, and community in neighborhoods undergoing gentrification. The authors conducted a qualitative study of longer-term and newer residents in three neighborhoods in Washington, DC, to examine how the demographic changes that accompany gentrification relate to consumption. The findings suggest that diversity-seeking tendencies among newer residents were accompanied by tensions in the social and consumption domains, such that longer-term residents perceived exclusion and all residents experienced a reduced sense of community. The authors also find that these dynamics undermined the diversity that drew residents to these areas in the first place, resulting in “faux diversity.” The authors draw on these findings to discuss strategies that marketers and policy makers can utilize to contribute to the development of inclusive, healthy, and sustainable diverse communities.