Hereafter: How Crises Shape Communities Through Learning and Institutional Legacies

What is it about?

Firms engage with their local communities, and can either draw support from their communities or be rejected by them. This research shows how a history of acceptance or rejection of firms affect their actions. We look at a sequence of two bank panics, where some communities saw bank runs that threatened the survival of the local banks. Communities that had a prior bank run saw banks avoiding community support and instead helping each other, while communities that had not rejected their bank during the early bank panic organized community support of the banks. Firms remember what communities have done to them, and act on it.

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Why is it important?

This is one of very few research papers that show how community actions have effects on firms over a period of decades. It is a pioneering paper in showing how firms can help each other in crisis when past experience shows that the community will not help.