We examine whether the reporting quality of US colleges is associated with student success. We predict that low college reporting quality is associated with worse student outcomes because low quality information does not provide students with accurate information, leading to poor matching between students and colleges. We measure college reporting quality using fines imposed by the US Department of Education, their placement under heightened cash monitoring (HCM), and their participation in voluntary reporting initiatives (VRI). We find that poor reporting quality is associated with higher subsequent student default rates. Colleges with poor reporting quality have lower graduation rates and higher student debt-to-income ratios upon graduation, two channels that lead to high student default rates. Our results are mainly driven by for-profit colleges which also have a higher ex ante likelihood of being fined, in particular for false claims. Department of Education fines are associated with a subsequent reduction in default rates suggesting enforcement plays a role in improving the quality of college reporting. Overall, we document in a large sample the consequences of the information environment of post-secondary educational institutions on student success and provide evidence consistent with higher quality information leading to a better match between students and colleges.
| Speaker: | Dr Pepa Kraft Professor of Accounting and Management Control, HEC Paris |
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