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Social proximity to capital and mortgage lending

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  • Zhang, Jennifer

Abstract

This study investigates the impact of social proximity to capital on the U.S. mortgage markets. The results show that mortgage loans in counties with stronger social connectedness to capital are associated with significantly larger loan amounts and lower interest rates. The endogeneity concern is mitigated by employing a propensity score matched sample. Channel analysis reveals that the potential mechanisms operate through borrowers’ higher income and improved credit conditions. The cross-sectional analyses indicate that first-time homebuyers in counties with closer social proximity to capital secure larger loans and lower rates, whereas minorities in these areas face adverse outcomes.

Suggested Citation

  • Zhang, Jennifer, 2024. "Social proximity to capital and mortgage lending," Finance Research Letters, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finlet:v:70:y:2024:i:c:s154461232401362x
    DOI: 10.1016/j.frl.2024.106333
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    More about this item

    Keywords

    Social connectedness index; Social proximity to capital; Mortgage lending;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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