Does Citizens’ Financial Literacy Relate to Bank Financial Reporting Transparency?

Figures & data

Table 1. Descriptive statistics.

	N	Mean	Q1	Median	Q3	Std. Dev.
$ABSDLLP\mathrm{\_}{A}_{it}$	4,788	0.002	0.001	0.001	0.002	0.002
$ABSDLLP\mathrm{\_}{B}_{it}$	4,788	0.002	0.001	0.001	0.002	0.000
$FINLI{T}_t$	4,788	0.596	0.579	0.592	0.609	0.027
$SIZ{E}_{it}$	4,788	7.578	6.500	7.241	8.392	1.547
$CAP{R}_{it}$	4,788	0.104	0.086	0.100	0.120	0.032
$EB{P}_{it}$	4,788	0.012	0.009	0.013	0.016	0.007
$AS{G}_{it}$	4,788	0.076	0.004	0.046	0.107	0.137
$ZSCOR{E}_{it}$	4,788	−3.522	−4.055	−3.633	−3.104	0.814
$\mathrm{\Delta }GD{P}_t$	4,788	0.008	0.001	0.013	0.020	0.022
$\mathrm{\Delta }UNEM{P}_t$	4,788	−0.001	−0.010	−0.005	0.001	0.014
$\mathrm{\Delta }HP{I}_t$	4,788	0.008	−0.026	0.016	0.039	0.049

Table 1 provides the descriptive statistics. Bank-level continuous variables are winsorized at top and bottom 1%. All variables are defined in Appendix B.

Table 2. Pearson correlation Matrix.

		1	2	3	4	5	6	7	8	9	10
1	$ABSDLLP\mathrm{\_}{A}_{it}$	1
2	$ABSDLLP\mathrm{\_}{B}_{it}$	0.924***	1
3	$FINLI{T}_t$	−0.098***	−0.112***	1
4	$SIZ{E}_{it}$	−0.085***	−0.072***	−0.028*	1
5	$CAP{R}_{it}$	−0.120***	−0.134***	0.017	0.065***	1
6	$EB{P}_{it}$	−0.161***	−0.185***	0.018	0.296***	0.187***	1
7	$AS{G}_{it}$	−0.087***	−0.098***	0.059***	0.115***	0.102***	0.097***	1
8	$ZSCOR{E}_{it}$	0.276***	0.303***	−0.031**	0.006	−0.425***	−0.319***	−0.101***	1
9	$\mathrm{\Delta }GD{P}_t$	−0.183***	−0.181***	0.002	0.058***	0.118***	0.155***	0.051***	−0.111***	1
10	$\mathrm{\Delta }UNEM{P}_t$	0.247***	0.232***	−0.009	−0.039***	−0.164***	−0.114***	−0.063***	0.107***	−0.650***	1
11	$\mathrm{\Delta }HP{I}_t$	−0.348***	−0.351***	0.191***	0.115***	0.205***	0.129***	0.207***	−0.143***	0.430***	−0.548***

Table 2 provides the Pearson correlation Matrix. Bank-level continuous variables are winsorized at top and bottom 1%. All variables are defined in Appendix B. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test.

Table 3. Estimation of discretionary loan loss provisions.

	Dependent Variable = $LL{P}_{it}$ (1)	Dependent Variable = $LL{P}_{it}$ (2)
Variable	Coefficient (t−Statistic)	Coefficient (t−Statistic)
Intercept	0.004*** (6.12)	0.003*** (4.86)
$LL{A}_{it-1}$	−0.160*** (−11.50)
$NP{L}_{it-1}$	0.015*** (2.89)
$LOA{N}_{it}$	0.001** (2.23)
$\mathrm{\Delta }LOA{N}_{it}$	0.003*** (5.12)	0.003*** (4.70)
$CH{O}_{it}$	1.010*** (48.40)	0.936*** (45.97)
$\mathrm{\Delta }NP{L}_{it}$	0.096*** (8.57)	0.102*** (10.74)
$\mathrm{\Delta }NP{L}_{it+1}$		0.036*** (4.51)
$\mathrm{\Delta }NP{L}_{it-1}$		0.040*** (8.64)
$\mathrm{\Delta }NP{L}_{it-2}$		0.017*** (3.44)
$SIZ{E}_{it-1}$		−0.000 (−0.61)
$\mathrm{\Delta }GD{P}_t$	0.007* (1.73)	0.003 (0.79)
$\mathrm{\Delta }UNEM{P}_t$	0.015 (1.39)	0.006 (0.49)
$\mathrm{\Delta }HP{I}_t$	−0.002 (−0.75)	−0.003 (−1.15)
Year Fixed Effects	Yes	Yes
N	5,486	4,825
Adj. $R^2$	0.874	0.865

Table 3 provides the OLS regression results of estimating DLLP, with Column 1 displaying Kanagaretnam et al. (2010) model and Column 2 displaying Beatty and Liao (2014) model, respectively. Bank-level continuous variables are winsorized at top and bottom 1%. All variables are defined in Appendix B. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test. Standard errors are clustered at the state level.

Table 4. Univariate tests.

	Low FINLIT Bank-Years	High FINLIT Bank-Years	Difference	Test of Difference (t-Statistic)
Mean $ABSDLLP\mathrm{\_}{A}_{it}$	0.0021	0.0018	0.0003	5.21***
Mean $ABSDLLP\mathrm{\_}{B}_{it}$	0.0022	0.0018	0.0004	5.72***
Median $ABSDLLP\mathrm{\_}{A}_{it}$	0.0013	0.0011	0.0002	6.11***
Median $ABSDLLP\mathrm{\_}{B}_{it}$	0.0012	0.0010	0.0002	6.67***

Table 4 compares the differences in the mean values of ABSDLLP between banks in low FINLIT states and those in high FINLIT states. Continuous variables are winsorized at top and bottom 1%. All variables are defined in Appendix B. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test.

Table 5. Financial literacy and discretionary loan loss provisions.

	Dependent Variable $=ABSDLLP\mathrm{\_}{A}_{it}$ (1)	Dependent Variable $=ABSDLLP\mathrm{\_}{B}_{it}$ (2)	Dependent Variable $=ABSDLLP\mathrm{\_}{A}_{it}$ (3)	Dependent Variable $=ABSDLLP\mathrm{\_}{B}_{it}$ (4)
Variable	Coefficient	Coefficient	Coefficient	Coefficient
	(t−Statistic)	(t−Statistic)	(t−Statistic)	(t−Statistic)
Intercept	0.011***	0.012***	0.010***	0.012***
	(8.37)	(9.23)	(2.80)	(3.11)
$FINLI{T}_t$	−0.010***	−0.012***	−0.012***	−0.014***
	(−4.66)	(−5.73)	(−5.72)	(−6.21)
$SIZ{E}_{it}$	−0.00002	−0.00001	0.0003	0.0003
	(−1.74)	(−0.81)	(1.24)	(0.62)
$CAP{R}_{it}$	0.004**	0.004**	0.010	0.010
	(2.35)	(2.04)	(1.31)	(1.36)
$EB{P}_{it}$	−0.017*	−0.026***	0.007	−0.003
	(−1.68)	(−2.81)	(0.52)	(−0.24)
$AS{G}_{it}$	0.0002	0.00002	0.001*	0.001*
	(0.43)	(0.05)	(1.86)	(1.78)
$ZSCOR{E}_{it}$	0.001***	0.001***	0.001*	0.001*
	(6.37)	(7.86)	(1.85)	(1.82)
$\mathrm{\Delta }GD{P}_t$	0.000	0.001	−0.000	−0.000
	(0.19)	(0.28)	(−0.25)	(−0.20)
$\mathrm{\Delta }UNEM{P}_t$	−0.008	−0.011*	−0.005	−0.008
	(−1.41)	(−1.69)	(−0.96)	(−1.48)
$\mathrm{\Delta }HP{I}_t$	−0.007***	−0.008***	−0.007***	−0.007***
	(−5.02)	(−4.38)	(−3.60)	(−3.10)
State Fixed Effects	Yes	Yes
Bank Fixed Effects			Yes	Yes
Year Fixed Effects	Yes	Yes	Yes	Yes
N	4,788	4,788	4,788	4,788
Adj. $R^2$	0.222	0.239	0.166	0.168

Table 5 provides the regression results for the relationship between FINLIT and ABSDLLP. Columns 1 and 3 provide the regression results of ABSDLLP_A. Columns 2 and 4 provide the regression results of ABSDLLP_B. Bank-level continuous variables are winsorized at top and bottom 1%. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test. Standard errors are clustered at the state level.

Table 6. Instrumental variable analysis of financial literacy and discretionary loan loss provisions.

	Dependent Variable = $FINLI{T}_t$ (1)
Panel A: First-Stage Regression Results for Predicting Respondents’ Financial Literacy
Variable	Coefficient (t-Statistic)
Intercept	0.477*** (12.59)
$COLLEG{E}_t$	0.492*** (3.20)
$SIZ{E}_t$	−0.001 (−0.49)
$CAP{R}_t$	−0.062 (−0.88)
$EB{P}_t$	−0.070 (−0.25)
$AS{G}_t$	−0.008 (−1.14)
$ZSCOR{E}_t$	0.0002 (0.04)
$\mathrm{\Delta }GD{P}_t$	−0.034 (−1.16)
$\mathrm{\Delta }UNEM{P}_t$	0.193** (2.27)
$\mathrm{\Delta }HP{I}_t$	−0.025 (−1.21)
State Fixed Effects	Yes
Year Fixed Effects	Yes
N	472
Adj. $R^2$	0.905
	Dependent Variable = $ABSDLLP\mathrm{\_}{A}_{it}$ (1)	Dependent Variable = $ABSDLLP\mathrm{\_}{B}_{it}$ (2)
Panel B: Second-Stage Regression Results for the Relationship between Predicted FINLIT and ABSDLLP
Variable	Coefficient (t−Statistic)	Coefficient (t−Statistic)
Intercept	0.011*** (3.02)	0.013*** (3.37)
$PRED\mathrm{\_}FINLI{T}_t$	−0.014*** (−6.57)	−0.016*** (−6.94)
$SIZ{E}_{it}$	0.0004 (1.55)	0.0003 (0.91)
$CAP{R}_{it}$	0.010 (1.30)	0.010 (1.36)
$EB{P}_{it}$	0.005 (0.33)	−0.006 (−0.49)
$AS{G}_{it}$	0.001* (1.85)	0.001* (1.76)
$ZSCOR{E}_t$	0.001* (1.82)	0.001* (1.82)
$\mathrm{\Delta }GD{P}_t$	−0.001 (−0.46)	−0.001 (−0.44)
$\mathrm{\Delta }UNEM{P}_t$	−0.004 (−0.79)	−0.007 (−1.34)
$\mathrm{\Delta }HP{I}_t$	−0.006*** (−2.75)	−0.006** (−2.33)
Bank Fixed Effects	Yes	Yes
Year Fixed Effects	Yes	Yes
N	4,788	4,788
Adj. $R^2$	0.167	0.170

Table 6 provides the regression results of the instrumental variable analysis for the relationship between FINLIT and ABSDLLP. Panel A provides the first-stage regression results of predicting FINLIT. Panel B provides the second-stage regression results of ABSDLLP on predicted FINLIT. Bank-level continuous variables are winsorized at top and bottom 1%. All variables are defined in Appendix B. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test. Standard errors are clustered at the state level.

Table 7. Financial literacy, retail deposits, and discretionary loan loss provisions.

	Dependent Variable $=ABSDLLP\mathrm{\_}{A}_{it}$ (1)	Dependent Variable $=ABSDLLP\mathrm{\_}{B}_{it}$ (2)
Variable	Coefficient (t−Statistic)	Coefficient (t−Statistic)
Intercept	−0.001 (−0.17)	0.001 (0.17)
$FINLI{T}_{it}$	−0.003 (−0.97)	−0.004 (−0.96)
$DEPOSI{T}_{it}$	0.00002 (0.68)	0.0002 (0.55)
$FINLI{T}_{it}\ast DEPOSI{T}_{it}$	−0.002*** (−3.16)	−0.002** (−2.24)
$SIZ{E}_{it}$	0.001* (1.79)	0.0005 (1.30)
$CAP{R}_{it}$	0.004 (0.44)	0.006 (0.64)
$EB{P}_{it}$	0.013 (0.80)	0.002 (0.13)
$AS{G}_{it}$	0.001 (1.53)	0.001 (1.42)
$ZSCOR{E}_{it}$	0.0004 (0.58)	0.0004 (0.47)
$\mathrm{\Delta }GD{P}_t$	0.0004 (0.15)	0.001 (0.33)
$\mathrm{\Delta }UNEM{P}_t$	−0.005 (−0.74)	−0.007 (−1.14)
$\mathrm{\Delta }HP{I}_t$	−0.007*** (−3.13)	−0.007** (−2.68)
Bank Fixed Effects	Yes	Yes
Year Fixed Effects	Yes	Yes
N	3,624	3,624
Adj. $R^2$	0.168	0.167

Table 7 provides the regression results for the effect of DEPOSIT on the relationship between FINLIT and ABSDLLP. Column 1 provides the regression results of ABSDLLP_A and Column 2 provides the regression results of ABSDLLP_B. The FINLIT variable in the interaction term FINLIT*DEPOSIT is mean centered. Bank-level continuous variables are winsorized at top and bottom 1%. All variables are defined in Appendix B. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test. Standard errors are clustered at the state level.

Table 8. Financial literacy, consumer loans, and discretionary loan loss provisions.

	Dependent Variable = $ABSDLLP\mathrm{\_}{A}_{it}$ (1)	Dependent Variable = $ABSDLLP\mathrm{\_}{B}_{it}$ (2)
Variable	Coefficient (t−Statistic)	Coefficient (t−Statistic)
Intercept	0.004* (1.72)	0.007** (2.43)
$FINLI{T}_t$	−0.006*** (−3.29)	−0.008*** (−3.76)
$CLOA{N}_{it}$	−0.00002 (−0.59)	0.00005 (1.27)
$FINLI{T}_t\ast CLOA{N}_{it}$	−0.002*** (−2.96)	−0.002** (−2.34)
$SIZ{E}_{it}$	0.0003 (1.55)	0.00001 (0.06)
$CAP{R}_{it}$	−0.005 (−0.86)	−0.002 (−0.39)
$EB{P}_{it}$	−0.005 (−0.38)	−0.011 (−0.73)
$AS{G}_{it}$	0.001 (1.59)	0.001 (1.66)
$ZSCOR{E}_{it}$	0.00004 (0.07)	0.00001 (0.19)
$\mathrm{\Delta }GD{P}_t$	−0.003 (−1.59)	−0.003 (−1.47)
$\mathrm{\Delta }UNEM{P}_t$	−0.011 (−1.58)	−0.014* (−1.78)
$\mathrm{\Delta }HP{I}_t$	−0.014*** (−5.42)	−0.014*** (−4.18)
Bank Fixed Effects	Yes	Yes
Year Fixed Effects	Yes	Yes
N	3,467	3,467
Adj. $R^2$	0.159	0.159

Table 8 provides the regression results for the mitigating effect of CLOAN on the relationship between FINLIT and ABSDLLP. Column 1 provides the regression results of ABSDLLP_A and Column 2 provides the regression results of ABSDLLP_B. The FINLIT variable in the interaction term FINLIT*CLOAN is mean centered. Bank-level continuous variables are winsorized at top and bottom 1%. All variables are defined in Appendix B. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test. Standard errors are clustered at the state level.

Table 9. Financial literacy, google search of bank-related information, and discretionary loan loss provisions.

	Dependent Variable = $GOOGL{E}_t$ (1)
Panel A: Financial Literacy and Google Search of Bank-Related Information
Variable	Coefficient (t−Statistic)
Intercept	−0.889*** (−3.91)
$FINLI{T}_t$	0.306*** (3.25)
$SIZ{E}_t$	0.005 (0.94)
$CAP{R}_t$	−0.100 (−1.26)
$EB{P}_t$	−0.522 (−1.07)
$AS{G}_t$	−0.025 (−1.32)
$ZSCOR{E}_t$	−0.001 (−0.12)
$\mathrm{\Delta }GD{P}_t$	−0.289*** (−2.85)
$\mathrm{\Delta }UNEM{P}_t$	0.384 (1.36)
$\mathrm{\Delta }HP{I}_t$	−0.199*** (−3.01)
State Fixed Effects	Yes
Year Fixed Effects	Yes
N	472
Adj. $R^2$	0.238
	Dependent Variable $=ABSDLLP\mathrm{\_}{A}_{it}$ (1)	Dependent Variable $=ABSDLLP\mathrm{\_}{B}_{it}$ (2)
Panel B: The Impact of Google Search of Bank-Related Information on the Relationship
between Financial Literacy and Discretionary Loan Loss Provisions
Variable	Coefficient (t−Statistic)	Coefficient (t−Statistic)
Intercept	0.010***	0.013***
	(2.92)	(3.27)
$FINLI{T}_t$	−0.010***	−0.013***
	(−3.59)	(−3.82)
$GOOGL{E}_t$	−0.001**	−0.002**
	(−2.05)	(−2.66)
$FINLI{T}_t\ast GOOGL{E}_t$	−0.013	−0.024
	(−0.49)	(−0.77)
$SIZ{E}_{it}$	0.00004	−0.0001
	(0.17)	(−0.47)
$CAP{R}_{it}$	0.004	0.006
	(0.81)	(1.09)
$EB{P}_{it}$	−0.002	−0.010
	(−0.15)	(−0.75)
$AS{G}_{it}$	0.001*	0.001*
	(1.98)	(1.89)
$ZSCOR{E}_{it}$	0.001	0.001
	(1.59)	(1.58)
$\mathrm{\Delta }GD{P}_t$	−0.001	−0.001
	(−0.47)	(−0.44)
$\mathrm{\Delta }UNEM{P}_t$	−0.011*	−0.015**
	(−1.80)	(−2.46)
$\mathrm{\Delta }HP{I}_t$	−0.010***	−0.010***
	(−4.67)	(−3.95)
Bank Fixed Effects	Yes	Yes
Year Fixed Effects	Yes	Yes
N	4,788	4,788
Adj. $R^2$	0.164	0.166

Table 9 provides the regression results for FINLIT, Google search of bank-related information, and ABSDLLP. Panel A provides the regression results for the relationship between Google search of bank-related information and FINLIT. Panel B provides the regression results for the mediating effect of GOOGLE on the relationship between FINLIT and ABSDLLP. Bank-level continuous variables are winsorized at top and bottom 1%. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test. Standard errors are clustered at the state level.

Table 10. Financial literacy, loan loss provisions, and income-increasing/decreasing discretionary loan loss provisions.

	Dependent	Dependent	Dependent	Dependent	Dependent
	Variable =	Variable =	Variable =	Variable =	Variable =
	$LL{P}_{it}$	$ABS\mathrm{\_}II\mathrm{\_}DLLP\mathrm{\_}{A}_{it}$	$ABS\mathrm{\_}II\mathrm{\_}DLLP\mathrm{\_}{B}_{it}$	$ABS\mathrm{\_}ID\mathrm{\_}DLLP\mathrm{\_}{A}_{it}$	$ABS\mathrm{\_}ID\mathrm{\_}DLLP\mathrm{\_}{B}_{it}$
	(1)	(2)	(3)	(4)	(5)
Variable	Coefficient	Coefficient	Coefficient	Coefficient	Coefficient
	(t−Statistic)	(t−Statistic)	(t−Statistic)	(t−Statistic)	(t−Statistic)
Intercept	0.009 (1.01)	0.014*** (3.44)	0.013*** (3.12)	0.011* (1.79)	0.015** (2.48)
$FINLI{T}_t$	−0.013* (−1.76)	−0.013*** (−4.20)	−0.014*** (−4.12)	−0.013*** (−3.75)	−0.015*** (−4.29)
$SIZ{E}_{it}$	0.004*** (4.76)	−0.0002 (−0.47)	−0.0002 (−0.52)	0.0005 (1.14)	0.0001 (0.28)
$CAP{R}_{it}$	0.020 (1.24)	0.020** (2.67)	0.018** (2.62)	0.005 (0.37)	0.010 (0.71)
$EB{P}_{it}$	0.072 (1.50)	−0.008 (−0.44)	−0.011 (−0.60)	−0.022 (−0.71)	−0.021 (−0.61)
$AS{G}_{it}$	−0.004*** (−3.48)	0.002*** (3.17)	0.001*** (2.73)	−0.001 (−1.27)	−0.001 (−0.98)
$ZSCOR{E}_{it}$	0.009*** (4.98)	0.001* (1.84)	0.001 (1.54)	0.001 (0.79)	0.002 (1.06)
$\mathrm{\Delta }GD{P}_t$	−0.039*** (−4.47)	0.003 (0.79)	−0.001 (−0.24)	−0.002 (−0.79)	0.001 (0.21)
$\mathrm{\Delta }UNEM{P}_t$	0.011 (0.56)	−0.000 (−0.00)	−0.007 (−0.82)	−0.007 (−0.72)	−0.010 (−1.05)
$\mathrm{\Delta }HP{I}_t$	−0.065*** (−7.95)	−0.007** (−2.64)	−0.008** (−2.46)	−0.007*** (−3.40)	−0.006*** (−3.01)
Bank Fixed Effects	Yes	Yes	Yes	Yes	Yes
Year Fixed Effects	Yes	Yes	Yes	Yes	Yes
N	5,715	2,135	2,135	1,936	1,936
Adj. $R^2$	0.460	0.201	0.191	0.157	0.184

Table 10 provides the regression results for the relationship between FINLIT and loan loss provisions as well as the absolute value of income-increasing discretionary loan loss provisions (ABS_II_DLLP) and income-decreasing discretionary loan loss provisions (ABS_ID_DLLP). Column 1 provides the regression results of LLP. Column 2 provides the regression results of ABS_II_DLLP_A. Column 3 provides the regression results of ABS_II_DLLP_B. Column 4 provides the regression results of ABS_ID_DLLP_A. Column 5 provides the regression results of ABS_ID_DLLP_B. Bank-level continuous variables are winsorized at top and bottom 1%. *, **, *** denote significance at the 10%, 5%, and 1% levels, respectively, based on a two-tailed test. Standard errors are clustered at the state level.

Table

Dependent Variables
ABSDLLP_A	The absolute value of discretionary loan loss provision, calculated as the absolute value of the residual from the regression model (1a): $LL{P}_{it}={\alpha }_0+{\alpha }_{1}LL{A}_{it-1}+{\alpha }_{2}NP{L}_{it-1}+{\alpha }_{3}LOA{N}_{it}+{\alpha }_4\mathrm{\Delta }LOA{N}_{it}+{\alpha }_{5}CH{O}_{it}+{\alpha }_6\mathrm{\Delta }NP{L}_{it}+{\alpha }_7\mathrm{\Delta }GD{P}_{it}+{\alpha }_8\mathrm{\Delta }UNEM{P}_{it}+{\alpha }_9\mathrm{\Delta }HP{I}_{it}+YEAR\mathrm{\_}DUMMIES+{ϵ}_{it}$
ABSDLLP_B	The absolute value of discretionary loan loss provisions in year $t$, calculated as the absolute value of the residual from the regression model (1b): $LL{P}_{it}={\alpha }_0+{\alpha }_1\mathrm{\Delta }LOA{N}_{it}+{\alpha }_{2}CH{O}_{it}+{\alpha }_3\mathrm{\Delta }NP{L}_{it}+{\alpha }_4\mathrm{\Delta }NP{L}_{it-1}+{\alpha }_5\mathrm{\Delta }NP{L}_{it-2}+{\alpha }_{6}SIZ{E}_{it-1}+{\alpha }_7\mathrm{\Delta }GD{P}_{it}+{\alpha }_8\mathrm{\Delta }UNEM{P}_{it}+{\alpha }_9\mathrm{\Delta }HP{I}_{it}+YEAR\mathrm{\_}DUMMIES+{ϵ}_{it}$
ABSDLLPS_A	ABSDLLP_A estimated by the first-stage model by state-year to allow the coefficients on the determinants to vary.
ABSDLLPS_B	ABSDLLP_B estimated by the first-stage model by state-year to allow the coefficients on the determinants to vary.
Variables of Interest
FINLIT	Statewide financial literacy index calculated as the average ratio of correct response to the five financial literacy questions (available in Appendix A) from the 2009, 2012, 2015 and 2018 NFCS State-by-State Surveys. We then use multiple imputation to fill in the years 2010–2011, 2013–2014, and 2016–2017.
FINLITW	The weighted average FINLIT based on state level deposits (aggregated from branch level data from the FDIC’s Summary of Deposits).
Other Variables
SIZE	Natural logarithm of total assets (at) from Compustat Bank.
CAPR	Total equity (ceq) divided by total assets (at) from Compustat Bank.
EBP	Earnings before loan loss provisions (pi + lntal) divided by total assets (at) from Compustat Bank.
ASG	Change in total assets (at) divided by lagged total assets (at) from Compustat Bank.
DTA	Retail deposits (RCON3485 + RCONB563 + RCON3486 + RCON3487 + RCONA529 + RCON3469) divided by total assets (RCFD2170 or RCON2170) from Call Reports. Alternatively, retail deposits (dpdc + cttd + dpsc + mmcd) divided by total assets (at) from Compustat Bank.
DEPOSIT	Decile rank of DTA.
CONSUM	Consumer loans (RCFD1975) divided by total loans (RCON2122) from Call Reports. Alternatively, consumer loans (lcacrd) divided by total loans (lntal) from Compustat Bank.
CLOAN	Decile rank of CONSUM.
ΔDEPT	Change in deposits (dptc) divided by beginning total assets (at) from Compustat Bank.
REAL	Real estate loans (RCFD1410) divided by total loans (RCON2122) from Call Reports. Alternatively, real estate loans (lcam) divided by total loans (lntal) from Compustat Bank.
COMMERC	Commercial and industrial loans (RCFD1763 + RCFD1764 or RCON1766) divided by total loans (RCON2122) from Call Reports. Alternatively, commercial and industrial loans (lcacld) divided by total loans (lntal) from Compustat Bank.
ROE	Net income (ni) divided by total equity (ceq) from Compustat Bank.
ZSCORE	Natural logarithm of (EBP + CAPR)/σ(EBP) multiplied by −1, where EBP is the mean of earnings before loan loss provisions (pi + lntal) divided by total assets (at) over the sample period; CAPR is the mean of total equity (ceq) divided by total assets (at) over the sample period; and σ(EBP) is the standard deviation of EBP over the sample period.
LLP	Loan loss provision (pll) divided by lagged total loans (lntal) from Compustat Bank.
CHO	Loan charge-offs (−1*nco) divided by lagged total loans (lntal) from Compustat Bank.
BRDSIZE	The number of board members (director_id) from ISS.
INDDIR	The number of independent directors (classification == ‘I’) divided by the total number of directors (director_id) from ISS.
AUDIT	Auditor industry specialization, defined as a dummy variable that equals one for banks audited by PwC, and zero otherwise from Audit Analytics.
LLA	Loan loss allowance (rcl) divided by total loans (lntal) from Compustat Bank.
NPL	Nonperforming loans (npat) divided by lagged total loans (lntal) from Compustat Bank.
ΔNPL	Change in nonperforming loans (npat) divided by lagged total loans (lntal) from Compustat Bank.
LOAN	Total loans (lntal) divided by total assets (at) from Compustat Bank.
ΔLOAN	Change in total loans (lntal) divided by lagged total loans (lntal) from Compustat Bank.
GOOGLE	The index of Google Trends searches of bank-related keywords for each state-year divided by 100. Bank-related keywords include ‘bank’, ‘Federal Reserve’, and ‘Economic’ or ‘Economy’.
COLLEGE	We first create a dummy variable that equals 1 if the survey respondent is a college graduate or with post-graduate education, and 0 otherwise. Then we use COLLEGE to represent the average proportion of NFCS survey respondents who are college graduates for each state-year.
INCOME	Natural logarithm of per capita income of each state from U.S. Bureau of Economic Analysis.
SOCCAP	Social capital of each state, aggregated from county-level social capital index for the years 1997, 2005, 2009, and 2014, available at Northeast Regional Center for Rural Development (NERCRD). We then linearly interpolate the data to fill in the years with missing data.
ΔGDP	Change in per capita GDP of each state from U.S. Bureau of Economic Analysis.
ΔUNEMP	Change in unemployment rate of each state from U.S. Bureau of Labor Statistics.
ΔHPI	Change in house price index of each state from Federal Housing Finance Agency.

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