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Title: "Let Us Put Our Moneys Together:" Minority-Owned Banks and Resilience to Crises
Citation Type: Working Paper
Publication Year: 2022
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Abstract: Minority-owned banks have a mission to promote economic wellbeing in their communities. They benefit from soft-information-based lending, which yields an advantage in serving community needs through times of financial and economic crises. To test these propositions, we analyze individual banks in their local market context from 2006-2020. Results suggest minority-owned banks improve economic resilience in their communities during the Global Financial Crisis (GFC) and the COVID-19 Crisis through increased small business and household lending, but fewer benefits are found during other phases of the business cycle. Our results are robust and stand up to treatments of identification concerns, including propensity score matching (PSM) and instrumental variables (IV). Our results imply if all US banks behaved in a manner consistent with minority-owned banks through the GFC, at least 1.9 million more minority jobs would have been maintained and at least $50 billion more in credit would have been available to small businesses on an annual basis. These findings are consistent with predictions of the economic resilience literature, but not those of the finance-growth nexus research.
Url: https://www.fdic.gov/analysis/cfr/bank-research-conference/annual-21st/papers/langford-paper.pdf
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Authors: Berger, Allen N; Feldman, Maryann P; Langford, W Scott; Roman, Raluca A
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Data Collections: IPUMS USA
Topics: Other, Poverty and Welfare
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