The real effects of bank donations: Evidence from mortgage origination and market entry

Abstract

We examine the real effects of bank donations to local nonprofit organizations on local lending and new market entry. We find that bank donations increase subsequent mortgage origination shares. We confirm the results by exploiting the reallocation of donations due to natural disasters. In addition, we show that pre-donations - donations made prior to market entry - increase the likelihood of new branch openings, but not mergers. These findings suggest that bank philanthropy yields tangible economic benefits, enhancing both local lending performance and the probability of successful geographic expansion.