Lightnews — Scholar-powered news

Donald Bowen

@bowen.finance

140 followers 480 following 33 posts

Bridging finance & tech @ Lehigh. Research: 💡innovation, 🤖 AI lending, ⚖️ algorithmic bias, & 🚀 startups. Data and papers at https://bowen.finance

Posts Media Videos Starter Packs

Pinned

Donald Bowen @bowen.finance · Dec 9

WP thread: “Measuring and Mitigating Racial Bias in LLM Mortgage Underwriting” with Don Bowen, McKay Price, and Ke Yang

Our audit study asks AI to assess simple mortgage applications (real HMDA data w/ randomized race and credit scores)

🦶🦶🏼🦶🏿 Download lukeste.in/llmmortgage

1/

Donald Bowen @bowen.finance · Mar 21

THANKS! And great timing. I teach my class on this next week. I was able to update my link to your website thanks to you.

6.6. Significant warnings about “statistical significance” — LeDataSciFi-2025

ledatascifi.github.io

Donald Bowen @bowen.finance · Jan 7

that’s the wrong word

It's dramatic tho

Donald Bowen @bowen.finance · Jan 7

Congrats! Very cool and well done paper

Donald Bowen @bowen.finance · Jan 7

😬

Reposted by Donald Bowen

Josh Kaplan @josh-kaplan.bsky.social · Jan 4

THREAD: In 2023, I received an envelope with no return address. Inside was a flash drive containing tens of 1000s of secret files.

It came from a vigilante with a tumultuous past, who'd conducted a years-long undercover operation. He didn’t tell the FBI or his family. He only told me.

Donald Bowen @bowen.finance · Jan 2

Much more in the paper (linked)

I'm not at #ASSA2025 (new kids) but able and willing to connect otherwise!

11/11

Revisiting Board Independence Mandates: Evidence from Director Reclassifications

<div> We provide causal evidence on the effects of mandated board independence. We compare firms that replace existing non-independent directors to firms that

papers.ssrn.com

Donald Bowen @bowen.finance · Jan 2

This paper is an example of how nice it is to work with great coauthors AND how great peer review can be. (Weird? But true!) We got wonderful feedback from referees at the JFQA previously and our current editorial team, and these have materially improved the paper. We are very grateful.

10/

Donald Bowen @bowen.finance · Jan 2

Policy implication: One-size-fits-all governance mandates can harm firms by forcing out directors with valuable firm-specific knowledge. More flexible approaches might better balance monitoring & advising roles.

Firms know this & recognize value of their dirs and so reclass when possible.

9/N

Donald Bowen @bowen.finance · Jan 2

Mechanism: Reclassified directors had ~25% more board experience & were 60pp more likely to be former employees. When firms couldn't reclassify, new directors focused more on monitoring (20% more likely to join audit committees) vs advising.

8/N

Donald Bowen @bowen.finance · Jan 2

Design insight: Previous work compared compliant vs non-compliant firms. This paper's triple-diff compares reclassifying vs non-reclassifying firms within the non-compliant group. Cleaner identification.

7/N

Donald Bowen @bowen.finance · Jan 2

Key findings: Non-reclassifying firms saw ROA decline by 2.7pp vs reclassifiers.

Main channel? Labor efficiency. These firms had higher SG&A costs, lower sales/profits per employee, and their 10Ks discuss process innovation less -> 📉 of op. expertise as knowledgeable directors depart 🛫

6/N

Donald Bowen @bowen.finance · Jan 2

Reclassifying firms (R=1) became compliant with exchange independence quickly via this way (panel 2), even though ISS classifications of their directors remain least independent (panel 3).

Upshot: R firms are able to retain employee directors at much higher rate (panel 4)

5/N

Donald Bowen @bowen.finance · Jan 2

Identification: Some firms could reclassify directors as "independent" (eg if they retired > 3 years ago) while others had to hire new outside directors. Reclassification eligibility was largely predetermined before mandates > quasi-random variation in compliance strategy that we can exploit.

4/N

Donald Bowen @bowen.finance · Jan 2

Takeaways
1. Inside dir advice is performance relevant via oper. efficiency
2. Insiders <=/=> agency problems
3. Gov standards disregard pre-existing governance arrangements (which tradeoff monitor/advice)
4. Speaks to policy debates (eg the push for maximal independence)

3/N

Donald Bowen @bowen.finance · Jan 2

Punchline: After the 2002 NYSE/NASDAQ board independence mandates, firms that replaced existing non-independent directors underperformed firms that retained these directors by reclassifying them as independent. Suggests valuable firm-specific knowledge was lost.

2/N

Donald Bowen @bowen.finance · Jan 2

🧵 I'm happy to share an updated draft!

"Revisiting Board Independence Mandates: Evidence from Director Reclassifications" provides causal evidence on the effects of mandated board independence.

Joint with Jerome Taillard (@babsoncollege.bsky.social)

#ASSA2025 #EconSky #FinSky

1/N

Donald Bowen @bowen.finance · Dec 18

@emollick.bsky.social I thought this little trick mighty be of interest

Donald Bowen @bowen.finance · Dec 9

Somehow, just asking LLM to be unbiased
• Eliminates approval recommendation gap (on average and across different credit scores)
• Reduces average racial interest rate gap by about 60% (from 35bp to 14), with even larger effects for lower-credit-score Black applicants

8/

Donald Bowen @bowen.finance · Dec 17

Can't wait for the @khoavuumn.bsky.social meme on this paper

Mihail Velikov @mvelikov.bsky.social · Dec 17

An academic paper has excellent empirical evidence & hypotheses that perfectly match the patterns in the data.

One catch: AI wrote the hypotheses after seeing the results.

Should this matter?

New paper w/ Robert Novy-Marx on AI-Powered (Finance) Scholarship🧵

papers.ssrn.com/sol3/papers....

Donald Bowen @bowen.finance · Dec 17

Really cool work that raises questions about how we think about science and progress. The push towards pre registration has benefits but foregoing HARKing has many costs too. The optimal balance is not obvious!

Mihail Velikov @mvelikov.bsky.social · Dec 17

An academic paper has excellent empirical evidence & hypotheses that perfectly match the patterns in the data.

One catch: AI wrote the hypotheses after seeing the results.

Should this matter?

New paper w/ Robert Novy-Marx on AI-Powered (Finance) Scholarship🧵

papers.ssrn.com/sol3/papers....

Donald Bowen @bowen.finance · Dec 10

Lesson: don't start your social media life during a hectic working lunch - I didn't change the author names in the first post 🤣

Donald Bowen @bowen.finance · Dec 9

Well I'm (mostly) happy to hear that!

patrick star from spongebob squarepants is pointing at someone with a long nose .

ALT: patrick star from spongebob squarepants is pointing at someone with a long nose .

media.tenor.com

Donald Bowen @bowen.finance · Dec 9

I’m very excited to now be able to follow this saga on main, now that I’m not just a lurker. 🤘

Donald Bowen @bowen.finance · Dec 9

My coauthors (@lukestein.com, McKay Price, and Ke Yang) and I were thrilled to find out our work “Measuring and Mitigating Racial Disparities in LLM Mortgage Underwriting” was recognized as the Best Paper at the (fantastic!) New Zealand Finance Meeting
acfr.aut.ac.nz/conferences-...

Donald Bowen @bowen.finance · Dec 9

Thanks and apologies to @lukestein.com for the thread copy. Can't improve on this!

Donald Bowen @bowen.finance · Dec 9

There’s more in the draft lukeste.in/llmmortgage

Obviously no one should (/would?😢) make critical financial decisions using prompts so simple. But genAI is getting deployed and importance of audits and intentional design are even more important in more complex systems!

Fin.

Measuring and Mitigating Racial Disparities in Large Language Model Mortgage Underwriting

We conduct the first study exploring the application of large language models (LLMs) to mortgage underwriting, using an audit study design that combines real lo