Assistant Professor of Finance
Texas Christian University
Interests: financial intermediation, household finance, corporate finance
“Societal Trust and Financial Market Participation: Evidence from the Freedman’s Savings Bank“ (With Malcolm Wardlaw)
Using a novel dataset from the Freedman’s Savings Bank, we examine how societal trust impacts policy makers’ goals of increased financial participation and economic integration. We find that events that impact trust in political representation and public safety also impact financial participation. We further find that black depositors are significantly less likely to escape the bank’s collapse and that older depositors with local roots are more likely to have wealth destroyed by the collapse. Our results demonstrate how the inherent fragility of financial institutions can disproportionately impact wealth accumulation in disenfranchised populations.
Bank branches in counties with a high rural population offer certificate of deposit (CD) rates of up to 18% higher than banks in counties that are more urban. There is a strong association between rural CD rates and lack of trust in financial markets. Furthermore, the effect is stronger in low-education rural counties. This association remains after controlling for aspects such as size, competition, economies of scale, and an exogenous supply shock to bank capital. Finally, I show that higher CD rates in rural counties are passed through to rural borrowers in the form of higher loan rates. Overall, my findings highlight an important link between trust in financial markets and its effect on saving and borrowing rates.
“100 Years of Banking” (coauthored with Amiyatosh Purnanandam and Taylor Begley, draft coming soon)
Using a novel dataset consisting of over 100 years of bank branch location data, we summarize the growth of mainstream and shadow banking for three states in the Midwest United States. Our results show the relative size of the banking and shadow bank industries throughout the 1900s. First, we demonstrate a sharp divide between rural and urban counties in access to finance. Second, we show a persistent substitution across financial institutions. Our results demonstrate that shadow banking is not a new invention in American society.