The Color of Hedge Fund Activism
43 Pages Posted: 25 Oct 2019 Last revised: 25 Nov 2019
Date Written: October 17, 2019
We examine the effect of hedge fund activism on mortgage lending. We find that banks targeted by hedge fund activism discriminate less against African American borrowers by approving more mortgage applications from African Americans. We also find that target banks charge lower interests on loans to African Americans. We show that these changes are not driven by changes in risk or risk preferences. Furthermore, we find that target banks are more likely to set up committees related to lending discrimination and are more likely to open new branches to address the discrimination issue after being targeted by activism.
Keywords: Hedge Fund Activism, Lending Discrimination, HMDA, Mortgage
JEL Classification: G0, G21, G28, J16
Suggested Citation: Suggested Citation