Job Market Paper

The Effect of Minority Bank Ownership on Minority Credit

Coauthor: Jung Sakong

Paper | Online Appendix


We study the effect of racial minority bank ownership on minority credit access. Using new data for 87 million minority borrowers, we present four main findings. First, minority-owned banks specialize in same-race mortgage lending. Over 70 percent of their mortgages go to borrowers of bank owners' same race. Second, the effect of minority bank ownership on minority credit is large and exceeds that of minority loan officers. We find that minority borrowers applying for mortgages in banks whose owners are of the same minority group are nine percentage points more likely to be approved than minority borrowers in non-minority banks. This effect is over six times that of a minority loan officer. Third, the default rate of minority banks' same-race borrowers is much lower than that of otherwise-identical borrowers of other races, and Asian banks drive this difference. Fourth, evidence from plausibly exogenous bank collapses suggests that the effect of Asian bank ownership might reflect an expansion rather than a reallocation of credit to Asian borrowers. Our findings are consistent with minority bank ownership reducing information frictions and improving credit allocations.

Working Papers

The Impact of Information on Credit Card Market Competition

Coauthors: Fritz Foley, Andres Liberman, and Alberto Sepulveda

Paper | Online Appendix


Using credit card data on the universe of Chilean borrowers, we show that public credit information increases competition in credit markets. We exploit a natural experiment whereby a non-bank lender’s credit card business was sold to a bank. As a result, its borrowers become observable by other banks through the credit bureau. Using a difference-in-differences design, we show that after the transaction, the lender’s borrowers, particularly those whose predicted bank default drops, get higher credit limits from other banks. The lender starts originating to safer borrowers, implying that public information reduces lenders’ incentive to “learn by lending.”

Work in Progress

Financing Frictions to High Growth Entrepreneurship

Development Banks as Social Insurance: Evidence from the CDFI Program

Estimating Depositors' Social Preferences: Experimental Evidence