Politically Polarized Depositors

Abstract

Exploiting a shock drawing public attention to banks’ financial relationships with the gun industry, I find that banks that lend to the gun industry experience significant decreases in deposit growth. The effect is stronger in regions with more Democrats or higher support for gun control. Anti-gun depositor movements raise funding costs for gun-lending banks and thus reduce their lending business, which coincides with slower growth in gun business establishments. Moreover, I find evidence that banks with public anti-gun policies also experience reduced deposit growth, specifically in regions with more Republicans or higher support for gun rights.

Keywords: Depositor behavior, Financial activism, ESG, Political value

JEL Classification: G21, G41, M14