Finance, Advertising, and Race

Claire Célérier and Purnoor Tak

The Review of Financial Studies, 2025, vol. 38, issue 11, 3149-3204

Abstract: We study how bank advertising practices contribute to racial disparities in financial markets by steering minorities toward inferior products. We exploit a regulatory change that incentivizes deposit collection at the Freedman’s Savings Bank, the first institution to collect deposits from African Americans post-Emancipation, by facilitating misuse of depositor funds. After deregulation, advertising volume rises, particularly in African American newspapers, leading to increased deposits from Black depositors despite the bank’s insolvency. We identify persuasion as a key mechanism; prescriptive stereotypes and false claims likely amplify advertising’s impact on African Americans, exacerbating historically large depositor losses after the bank’s collapse.

Keywords: G21; M37; J15; G51; N21 (search for similar items in EconPapers)
Date: 2025
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