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Comparing lending decisions of minority‐owned and White‐owned banks

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  • Harold A. Black
  • Breck L. Robinson
  • Robert L. Schweitzer

Abstract

A recent paper by Black, Collins and Cyree [J. Financ. Serv. Res. 11 (1997) 189.] attempted to determine if Black‐owned banks discriminated against Black applicants for mortgage credit. They concluded that Black applicants were more likely to be rejected than White applicants when applying for mortgage credit at a Black‐owned bank. However, the use of the Metropolitan Statistical Area (MSA) as the geographic delineation from which minority‐owned and non‐minority‐owned banks are compared may not provide a narrowly defined market from which an accurate comparison can be made. Here, the zip code cluster technique developed by Clair [Econ. Rev. (1988) 11.] is used to control for differences in applicant base that may result when using a broader geographic definition such as an MSA. The results reported in this study show that contrary to the results of Black, Collins and Cyree, Black‐owned banks are not statistically more likely to reject Black applicants. The study also considers Asian‐owned and Hispanic‐owned banks. The results show that Asian‐owned banks are equally as likely to provide a mortgage to Asian applicants, while Hispanic applicants are more likely to receive a mortgage from a Hispanic‐owned bank.

Suggested Citation

  • Harold A. Black & Breck L. Robinson & Robert L. Schweitzer, 2001. "Comparing lending decisions of minority‐owned and White‐owned banks," Review of Financial Economics, John Wiley & Sons, vol. 10(1), pages 23-39, March.
    • Handle: RePEc:wly:revfec:v:10:y:2001:i:1:p:23-39
    DOI: 10.1016/S1058-3300(01)00022-2
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    References listed on IDEAS

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    1. David Horne, 1997. "Mortgage Lending, Race, and Model Specification," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 43-68, February.
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