Do minority banks perform better or worse than non-minority banks?

Abstract

We investigate whether Minority Owned/ControlledBanks (MDIs) perform better or worse than Non-Minority Banks (NMDIs) in terms of lower profit rates and higher risk. MDIs and NMDIs are compared using a propensity score matching (PSM) methodology. We also compare the performance when their headquarters are in the same census tract. In contrast to previous and earlier studies, the empirical results indicate that MDIs exhibit no signs of under- or over-performance vis-à-vis NMDIs. Moreover, we find no statistically significant difference between the four sub-categories of MDIs (Black, Asian, Hispanic, and Native American) and NMDIs regarding either profitability or riskiness. Robustness checks using zip code and city-level data effectively confirm these results.