Violence, Positive Political Developments, and Financial Market Participation: Evidence from the Freedman's Savings Bank

Abstract

Using a detailed depositor arrival data from the Freedman's Savings Bank, we examine how social unrest impacts policy makers' goals of increased financial participation and economic integration for minorities. We find that events that imperil public safety also decrease participation in banks. Alternatively, events that increase social stability increase the arrival of new depositors at the bank. We show that these differences in participation occur along racial lines during violent events. Our results demonstrate how social conditions can alter participation in the banking system.

Keywords: violence, banking participation, minority banking, historical finance

JEL Classification: G51, G53, G41, N11, O16