Bank Socialness: It Matters When It Counts

In the last decade, social unrest has significantly increased on a global scale as well as in the USA. The literature has documented the negative economic impact of social unrest on lower GDP and stock valuations. In this paper, I extend the literature by examining the effect of social unrest on credit supply in the US. I document a negative relationship between social unrest and the growth of business loans, especially commercial and industrial loans (even for small businesses). More importantly, the socialness of banks seems to moderate this negative impact, as banks with high social scores increase their commercial loan supply more than their peers with low social scores. Specific borrower characteristics and lending conditions also play similar mitigating roles.