Date of Award

Spring 2025

Document Type

Open Access Dissertation

Department

Moore School of Business

First Advisor

John Hackney

Abstract

The first chapter examines how the deterioration of a household’s balance sheet alters its propensity to sue another entity for damages in civil court. Using state-level administrative judicial data longitudinally linked to the value of individual plaintiffs’ real estate holdings, this study finds that a 5% decline in housing value is associated with an 8% increase in the probability of filing a civil suit. Similarly, a household entering a negative equity position on its mortgage is associated with a 14% increase. When facing distress, households are more likely to engage in civil action against both firms and other households, particularly for relatively small cases that can be resolved quickly and have low costs to initiate. When examining case outcomes, I find individuals are successful in extracting value through the civil court system in times of crisis. Overall, this is the first evidence on the financial determinants of individual civil action, and the results indicate financial distress is a key driver of household-level civil litigation. The second chapter examines the relationship between sleep and decision-making in online financial environments. Using online lending microdata, I show that sleep has important consequences for household financial outcomes. Insufficient sleep raises default risk, particularly for loan applications made in the morning when the effects of a lack of sleep are strongest. For identification, I apply a spatial regression discontinuity design leveraging exogenous discontinuities in sunset time across time zone boundaries, supplemented by analyses utilizing daylight savings time shifts. The results suggest that a behavioral mechanism behind this effect is increased levels of heuristic thinking in the application process, signaling a lack of deliberation in acquiring additional credit under the conditions of poor sleep. In summary, this study provides the first evidence of the influence of insufficient sleep on household financial behavior. The third chapter investigates how financial literacy shapes the propensity of individuals to commit financial crime. Using state-level administrative data on criminal charges linked to comprehensive public records, we exploit a policy-based discontinuity in grade level assignment based on individual birth dates that exogenously requires certain high school cohorts to attend a financial literacy course. Our estimates suggest that exposure to the course reduces the propensity to commit financial crime by 37%. The reduction is driven by declines in embezzlement and is stronger for low-income individuals. Additional evidence suggests that the reductions are primarily explained by improvements in household balance sheets.

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© 2025, Paul Freed

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