Bank Public Status and Mortgage Lending Discrimination

47 Pages Posted: 21 Oct 2019 Last revised: 26 May 2021

See all articles by Yongqiang Chu

Yongqiang Chu

Belk College of Business, UNC Charlotte

Xiaonan (Flora) Ma

University of South Carolina, Darla Moore School of Business, Department of Finance, Students

Tim Zhang

University of Wyoming, College of Business

Date Written: May 6, 2021

Abstract

Comparing private banks that went public through mergers and acquisitions with similar private banks, we find that going public reduces the mortgage denial rates for African American borrowers by 6.1-6.3 percentage points, which reduces the racial disparity in mortgage approval rates by a third. Our results are not driven by changes in borrower risk characteristics, lender risk preferences, securitization, or increased disclosure requirements. The effect is more pronounced in areas suffering stronger racial biases. Our results suggest that the dispersed ownership can mitigate non-economically motived prejudice of concentrated private ownership and thereby alleviates taste-based discrimination in mortgage lending.

Keywords: Lending Discrimination, Diffuse Ownership, Capital Market

JEL Classification: G0, G21, G28, J16

Suggested Citation

Chu, Yongqiang and Ma, Xiaonan (Flora) and Zhang, Tim, Bank Public Status and Mortgage Lending Discrimination (May 6, 2021). Available at SSRN: https://ssrn.com/abstract=3461061 or http://dx.doi.org/10.2139/ssrn.3461061

Yongqiang Chu (Contact Author)

Belk College of Business, UNC Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
7046877695 (Phone)

Xiaonan (Flora) Ma

University of South Carolina, Darla Moore School of Business, Department of Finance, Students ( email )

1014 Greene Street
Columbia, SC 29208
United States

Tim Zhang

University of Wyoming, College of Business

1000 E. University Avenue
Department 3275
Laramie, WY 82071
United States

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