Paper Spotlight: Culture, Lending Relationships, and the Cost of Credit

Giorgio Albareto

Maddalena Galardo

Paolo Emilio Mistrulli

Bianca Sorvillo








As migration across countries and continents has continued to rise, societies must ask whether these new members of their communities are suffering from lower access to finance due to a trust gap arising from cultural differences. There is ample evidence showing that cultural differences have an important effect on economic outcomes, and they do so through two different channels. First, there could be a dislike toward counterparties who have a different cultural background, akin to taste-based discrimination. Second, cultural differences could give rise to informational frictions, reminiscent of statistical discrimination. Identifying and disentangling these two channels empirically is very hard.

In “Culture, Lending Relationships, and the Cost of Credit,” Giorgio Albareto, Maddalena Galardo, Paolo Emilio Mistrulli, and Bianca Sorvillo study how cultural differences affect the functioning of credit markets. Specifically, they investigate whether migrants to Italy pay more for credit than natives after controlling for several factors that could otherwise have an impact on credit supply. Using granular data, the authors find that, on average, migrants pay 36 basis points more for credit relative to natives. There is cross-sectional heterogeneity across different migrant groups: migrants from Asia pay the highest rates, while migrants from other European Union countries pay the lowest ones. While interesting, these results on their own cannot help us conclude whether the mechanism generating them is taste-based or statistical discrimination. To do so, the authors track the interest rates charged to subsequent loans as the borrower-lender relationship matures over time. In a long-term relationship, a lender should be able to obtain both soft and hard information about the borrower. However, if loan officers practice taste-based discrimination against borrowers with a culturally different background than their own, interest rate differentials on repeat loans would not be affected by the additional information collected by a lender. The results are more consistent with statistical discrimination: the interest rate differential between migrants and natives narrows as the borrower-lender relationship evolves over time.

Spotlight by Andrew Ellul
Photos courtesy of Giorgio Albareto, Maddalena Galardo, Paolo Emilio Mistrulli, and Bianca Sorvillo

Twitter Update

We combined our journal Twitter accounts to create a central location for news about the SFS journals and conferences! The handle @RevOfFinStudies is now @SFSjournals. The handles @RevOfCorpFin and @RevOfAssetPric are now archives.

Follow @SFSjournals on Twitter for news about RFS, RAPS, RCFS, and the SFS Cavalcade conferences.

Best Paper Awards at CSEF-RCFS Conference on Labor, Finance, and Inequality

The winners of the best paper awards at the CSEF-RCFS Conference on Finance, Labor, and Inequality are:

“Owner Culture and Pay Inequality within Firms,” by Jan Bena, Guangli Lu, and Iris Wang

“Can the Unemployed Borrow? Implications for Public Insurance,” by J. Carter Braxton, Gordon Phillips, and Kyle Herkenhoff

“Early exposure to entrepreneurship and the creation of female entrepreneurs,” by Mikkel Baggesgaard Mertz, Maddalena Ronchi, and Viola Salvestrini

The program is available here. Congratulations to the winners!

Paper Spotlight: Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time

Bin Wei

Feng Zhao

Various studies provide evidence of racial and ethnic disparities in residential mortgage lending, and show that minorities face a higher probability of being denied a mortgage and a higher cost of capital when they are approved for one. In “Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time,” Bin Wei and Feng Zhao investigate a dimension about which very little is known, the time to process a loan application. Delays in processing applications can introduce unnecessary uncertainty into the process of purchasing a home or refinancing an existing mortgage loan.

Using HMDA data from 2001 through 2006, the authors find that loan applications by Black borrowers take longer to process than applications by White, Hispanic, or Asian borrowers. In fact, including lender fixed effects widens the racial gap, doubling the gap between Black and White borrowers from 1.8 days to 3.4 days. This is an important result because it implies differential treatment of minority and White borrowers by the same lender. The gap is especially large on loans sold to GSEs (government-sponsored enterprises), being as large as 7.2 days over the 2001–03 period. In contrast, loans sold to private-label securitizers often required little to no documentation and were processed almost a day faster when the borrower was Black.

Relative to the population, Black borrowers are underrepresented in the GSE sample and overrepresented in the private-label securitization sample, which contains loans that were processed more quickly and subsequently experienced higher default rates. One implication of the results is that an important reason for Black borrowers taking on nonstandard loans was the difficulty they had in obtaining GSE-eligible loans.

Spotlight by Uday Rajan
Photos courtesy of Bin Wei and Feng Zhao

Editorial Team Changes

We are grateful to our retiring associate editors:

Carola Frydman
Victoria Ivashina
Daniel Paravisini

And we welcome our incoming associate editors:

Amil Dasgupta (London School of Economics)
Sabrina Howell (New York University)
Rawley Heimer (Boston College)
Constantine Yannelis (Chicago Booth School of Business)
Ayako Yasuda (UC Davis)
Alminas Zaldokas (Hong Kong University of Science and Technology)

Changes are effective July 1.

Video Message Celebrating 35 Years of the SFS

On the occasion of the 35th anniversary of the founding of the SFS, we’ve created a video message featuring our founders and some of our past Presidents. This video, which played at lunch at the SFS Cavalcade conference, answers the question: Why is it called the Cavalcade? Featuring:

George Constantinides, Founding Member & President 1991-1994
Chester Spatt, Founding Member & President 1994-1997
Michael Brennan, Founding Member & President 1997-1999
Milton Harris, President 1999-2002
Ravi Jagannathan, President 2002-2005
Matthew Spiegel, President 2014-2017, Founder of the SFS Cavalcade

Paper Spotlight: Determinants of LGBTQ+ Corporate Policies

Tanja Artiga González

Georg D. Granic

G. Nathan Dong

Paul Calluzzo







Fostering diversity implies inclusiveness and support of LGBTQ+ communities. LGBTQ+ issues have been the subject of deep and polarized debates in the wider society. Corporations, being an integral component of society, need to make important choices on this polarizing topic. It should be no surprise that the corporate world has produced examples of firms that have been open about their support to the LGBTQ+ community while others have publicly opposed same-sex marriage and stripped benefits from same-sex partners of their employees. Others still may have decided to sit on the fence.

What are the factors that determine corporate LGBTQ+ policies and what drives changes in these policies? Tanja Artiga González, Paul Calluzzo, G. Nathan Dong, and Georg D. Granic study this question in the paper “Determinants of LGBTQ+ Corporate Policies.” The paper’s objective is the identification of the different factors explaining LGBTQ+-related corporate policies and the divergent choices made by corporations on this issue.

The authors argue that the divisive nature of the societal debate around LGBTQ+-rights makes LGBTQ+-centered corporate commitments and engagements quite distinct from other  corporate social responsibility (CSR) policies adopted by firms. LGBTQ+ engagement could be described as more sensitive and controversial than many other conventional CSR activities. Such engagement can also potentially generate dissatisfaction among the wider stakeholder base of corporations. In the paper, the authors capture corporate LGBTQ+ policy using the Corporate Equality Index (CEI), a measure developed by the Human Rights Campaign that is based on four main criteria: nondiscrimination policies, internal education and accountability, public commitment, and equitable benefits. The paper finds that large, young, and profitable firms have higher CEI scores. Firms with highly-educated workers, those that operate in more liberal political environments, and those that primarily serve retail customers tend to have higher CEI scores. Further, a firm’s LGBTQ+ policies respond to pressure from shareholders through LGBTQ+-related proposals.

Spotlight by Camelia Kuhnen
Photos courtesy of Tanja Artiga González, Paul Calluzzo, G. Nathan Dong, and Georg D. Granic

Forthcoming Papers

“Equity Issuance Methods and Dilution” by Mike Burkart and Hongda Zhong

“Delegated Investment Management in Alternative Assets” by Aleksandar  Andonov

Cavalcade Keynote Presentations

The keynote presentations from SFS Cavalcade North America 2022 are posted on the Cavalcade website:

Cavalcade Keynote
“Intangible Capital”
Andrea Eisfeldt (UCLA)

Review of Corporate Finance Studies Keynote
“Cross-Subsidies in Household Finance”
Tarun Ramadorai (Imperial College London)

Review of Asset Pricing Studies Keynote
“COVID-19 and the Principles of Economics
Chester Spatt (Carnegie Mellon University)

Paper Spotlight: Hidden Performance: Salary History Bans and the Gender Pay Gap

Jesse Davis

Paige Ouimet

Xinxin Wang








The gender pay gap is one glaring example of discrimination. Some states, though, have adopted salary history bans to limit the perpetuation of previous discrimination. In the presence of salary history bans, employers cannot request and utilize a job candidate’s previous salary information. However, such bans have a possible unintended consequence: preventing potential employers from being able to observe worker productivity—that is, blocking the information channel. The question is, then, whether this unintended consequence induces costs that will end up making salary bans counterproductive. In their RCFS paper “Hidden Performance: Salary History Bans and the Gender Pay Gap,” Jesse Davis, Paige Ouimet, and Xinxin Wang address this important question. They estimate the causal impact of salary history bans on wages using a panel dataset of wage data for public-sector employees. The paper contains two important results: salary history bans lead to a 3% decline in new-hire wages, and they have minimal effects on the gender pay gap among public sector employees. The authors expect the impact of increased uncertainty, arising from the ban, to be of particular importance when labor market protections are greater. In fact, the paper finds stronger wage reductions among new hires when more of the workers are unionized. Overall, these results are consistent with the view that limiting access to an informative signal of worker quality, even though it may be biased, has important and surprising implications for wages and the gender pay gap.

Spotlight by Isil Erel
Photos courtesy of 
Jesse Davis, Paige Ouimet, and Xinxin Wang