Hedge Fund Activism and Discrimination


We examine the effect of hedge fund activism on mortgage lending. We find that banks targeted by hedge fund activism discriminate less against African American borrowers by (1) approving more mortgage applications from African Americans; and (2) charging lower interests on loans to African Americans. We show that these changes are not driven by changes in risk or risk preferences. Furthermore, we find that target banks are more likely to set up new committees and are more likely to open new branches to address lending discrimination after being targeted by activism.

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