Politically Polarized Depositors

Jinoug Jeung

♦ Exploiting an exogenous increase in public awareness of banks’ lending to the gun industry, this paper documents significant deposit outflows from gun lenders. These outflows are stronger in Democratic-leaning markets and for Republican-leaning lenders. In contrast, anti-gun lenders experience limited and insignificant outflows, consistent with policy alignment with depositor values. Outflows tighten funding constraints, prompting gun lenders to reduce deposit spreads and branches in Democratic-leaning markets. While large gun lenders remain resilient, small gun lenders significantly reduce CRA loan volumes. The findings highlight political value misalignment as a driver of depositor behavior and its real effects on bank operations.

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