Racial Disparities in the Paycheck Protection Program

Sergey Chernenko and David S. Scharfstein

No 29748, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a large sample of Florida restaurants, we document significant racial disparities in borrowing through the Paycheck Protection Program (PPP) and investigate the causes of these disparities. Black-owned restaurants are 25% less likely to receive PPP loans. Restaurant location explains 5 percentage points of this differential. Restaurant characteristics explain an additional 10 percentage points of the gap in PPP borrowing. On average, prior borrowing relationships do not explain disparities. The remaining 10% disparity is driven by a 17% disparity in PPP borrowing from banks, which is partially offset by greater borrowing from nonbanks, largely fintechs. Disparities in PPP borrowing cannot be attributed to lower awareness of PPP loans or lower demand for PPP loans by minority-owned restaurants. Black-owned restaurants are significantly less likely to receive bank PPP loans in counties with more racial bias. In these counties, Black-owned restaurants are more likely to substitute to nonbank PPP loans. This substitution, however, is not strong enough to eliminate racial disparities in PPP borrowing. Finally, we show that our findings apply more broadly across industries in a sample of firms that were likely eligible for PPP.

JEL-codes: G01 G21 G23 G28 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-ban and nep-ure
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Sergey Chernenko & David Scharfstein, 2024. "Racial disparities in the Paycheck Protection Program," Journal of Financial Economics, vol 160.

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