Do Depositors Respond to Banks' Social Performance?
Forthcoming, The Accounting Review (DOI - https://doi.org/10.2308/TAR-2019-0653)
50 Pages Posted: 17 Oct 2022 Last revised: 15 Jul 2023
Date Written: October 14, 2022
We study whether and how banks’ social performance affects depositors, who hold demandable debt with pervasive government protection. Exploiting the regulatory releases of bank performance ratings for community development and a difference-in-differences design, we find a decline in deposit growth following the release of negative bank social performance. In addition, deposits that are impacted by the negative events flow to nearby banks with high social performance. Further analyses find that the results hold similarly among insured and uninsured deposits and are primarily driven by banks with a large proportion of deposits from high-trust and pro-social counties, and in poor information environments. Overall, we contribute to the literature by documenting the importance of social performance to non-shareholder stakeholders and providing implications for bank stability.
Keywords: Bank social performance, Deposit flows, Trust
JEL Classification: D82, G21, M14
Suggested Citation: Suggested Citation