Market size structure and small business lending: Are crisis times different from normal times?

Size: px
Start display at page:

Download "Market size structure and small business lending: Are crisis times different from normal times?"

Transcription

1 Market size structure and small business lending: Are crisis times different from normal times? Allen N. Berger University of South Carolina Wharton Financial Institutions Center European Banking Center Geraldo Cerqueiro Catolica Lisbon School of Business and Economics María Fabiana Penas CentER Tilburg University June 2014 Abstract Conventional wisdom holds that small banks have comparative advantages vis-à-vis large banks in serving small firms, while recent literature suggests this may not be the case. Using a panel of recent US start-ups, we investigate how small bank presence affects these firms in normal times ( ) and in the recent financial crisis ( ). We find that greater small bank presence yields significantly more lending to and slightly lower failure rates of these firms during normal times. However, these benefits disappear during the financial crisis, possibly because small banks are less diversified and benefit less from government guarantees than large banks. Keywords: Banks, Bank size, Small business, Start-ups, Financial crisis JEL Classification: G21, G28, L11 We are grateful to the editor, Franklin Allen, the anonymous referee and conference participants at the CEPR/ECB/Kelley School of Business / Review of Finance Conference on Small Business Lending (Frankfurt) for helpful comments. Some of the data are derived from the Kauffman Firm Survey restricted-access data file. All opinions, findings, conclusions, and recommendations are those of the authors and do not necessarily reflect the views of the Ewing Marion Kauffman Foundation.

2 I. Introduction Banks are a critical source of funding for small firms. According to the 2003 Survey of Small Business Finance (SSBF), 57% of debt funding for US small businesses is from banks. Robb and Robinson (2014) also document that bank financing is also the most important source of external funding for recent start-ups. Given the importance of credit markets for small firms, including start-ups, much attention has also been devoted to the question of which type of financial institution is best able to serve their financial needs. The conventional wisdom holds that small banks may have comparative advantages visà-vis large banks in serving small, opaque firms using soft qualitative information gathered through relationships that cannot easily be transferred through the communication channels of large banks (Stein, 2002). An additional problem for large banks may be the number of layers of management required for loan approval. This is because the loan officer is the prime repository of the soft relationship information that cannot be easily communicated, giving a comparative advantage to small institutions with fewer layers of management (e.g., Berger and Udell, 2002) or with less hierarchical distance between the loan officer and the manager that approves the loans (e.g., Liberti and Mian, 2009). It is also argued that large banks may suffer Williamsontype (Williamson, 1988) organizational diseconomies associated with providing hardinformation loans to more transparent large businesses together with soft-information relationship loans to more opaque small businesses. However, in contrast to the conventional wisdom, it has been recently argued that large banks may be superior in serving at least a subset of small, opaque customers using hard quantitative information (Berger and Udell, 2006). Large banks may be able to exploit economies of scale in the processing and transmission of hard information and use these to deal 1

3 with the opacity problem for some small businesses. For example, large banks can use small business credit scoring to make loans up to $100,000 to small businesses with little available information about the firm by incorporating consumer information about the small business owner (e.g., Frame, Srinivasan, and Woosley, 2001). As shown below, the empirical evidence on whether small or large banks can better serve small businesses once favored the conventional wisdom, but more recent evidence is mixed. The results of this debate have important policy implications about the effects of deregulation and the resulting consolidation of the banking industry and whether it might harm small businesses. Our paper contributes to this debate in three important ways. First, we provide new evidence on how the local market size structure of banks (measured by the percentage of branches owned by small banks) affects the bank credit received by small firms, and whether it affects their probabilities of failure. Second, we focus on recent start-up small businesses that are particularly opaque, which are sometimes thought to be best served by soft-informationbased relationship loans by small banks and sometimes thought to be best served by hardinformation-based credit scoring loans by large banks. Most prior studies look at a much broader definition of small businesses, such as the Survey of Small Business Finance (SSBF) and Small Business Administration (SBA) definition of up to 500 full-time equivalent employees. Studies using the SSBF do not have longitudinal data and cannot follow up on the same firms over time. Third, we compare the results during normal times versus the recent financial crisis. Prior research focuses on normal times, but credit availability concerns are generally greatest during financial crises. It is unclear a priori whether financial crises hurt small business credit availability more for small or large banks. On the one hand, small banks are largely funded by core deposits, which are generally are not reduced during financial crises, whereas large banks rely more on wholesale interbank and capital market funding, which are more disrupted by 2

4 financial crises. On the other hand, during the recent financial crisis, small banks were less diversified both geographically and across product lines, and suffered greater losses from their real estate loans. Moreover, small banks may receive less explicit and implicit government guarantees during financial crises. For example, all of the largest commercial banks received Troubled Asset Relief Program (TARP) funds, whereas only a small fraction of small banks were recipients, and small banks failed much more often during the financial crisis. These factors may have pressed small banks to adopt more conservative lending policies during crisis times. We use data from a representative panel of small US start-up firms for the period , and compare how the presence of small banks in local markets affects these firms financing and survival in normal times ( ) and in crisis times ( ). The main dataset is the Kaufman Firm Survey (KFS), a longitudinal survey of 4,928 firms that started operations in 2004, and are followed annually. The KFS contains detailed information on these firms financing sources, including bank financing. Furthermore, the KFS allows us to distinguish between different types of loans, according to who is liable for the credit (the firm or its owner) and to the type of loan (term loans, credit cards, and business lines of credit). The market size structure, or percentage of branches owned by small banks in the local market (Metropolitan Statistical Area (MSA), New England County Metropolitan Areas (NECMA), or rural county), is computed using the FDIC Summary of Deposits data. In line with the conventional wisdom, we find that a greater market presence of small banks results in more lending to small, opaque firms during normal times. However, this differential effect disappears during the financial crisis. These results are stronger for business credit (i.e., loans obtained in the name of the firm) than for personal credit used to finance the 3

5 business. This latter finding could be due to the fact that large banks can often use credit scoring for personal loans. When we analyze the different types of bank financing, we find that the benefits of a greater presence of small banks in normal times are restricted to term loans and to business lines of credit. We find no differential effect for credit cards. This result is not surprising, since credit card financing is a transactional financing mode with a competitive landscape that goes well beyond the boundaries of our definition of local market. We also find that a greater presence of small banks may have a small beneficial effect in terms of reducing the failure rate of small, opaque firms during normal times, but this effect is reversed during the financial crisis. Altogether, these results indicate that the greater presence of small banks increases the supply of credit to small, opaque firms during normal times only. These results suggest that during the crisis, small banks were no longer able to sustain their competitive advantage over large banks. Our results hold after controlling for several firm, owner, and market characteristics. In addition, we exploit the variation in local economic conditions to carefully address potential endogeneity concerns. We worry that our banking market structure variables might be correlated with the local demand for credit. For instance, it could be that small banks are more prevalent in lower income areas, where the reduction in credit demand during the crisis may have been more pronounced (Kahle and Stulz, 2013). To address this potential concern, we allow the local average house value and local average income (both vary at the zip code level) to have differential effects on financing in normal times and in crisis times. We also control for differential industry-specific shocks in normal times and in crisis times. We argue that these local economic conditions and industry are important demand-side drivers of bank financing, which enable us to interpret our banking market structure measures as capturing reasonably 4

6 exogenous variation in the supply of credit to small firms. Also to address potential endogeneity concerns with the local market size structure changing with demand conditions, we measure market structure using 2003 FDIC Summary of Deposits data in our main analysis. In additional robustness tests, we also verify that our results are not sensitive to the specification of the econometric model used, to the choice of the starting year of the crisis, or to the measure of banking market structure used. Our study is related to previous papers that focus on understanding whether small banks have a competitive advantage over large banks in lending to small businesses during normal times. The evidence is mixed. Most of the early studies provide empirical evidence supporting the conventional wisdom (Haynes, Ou, and Berney, 1999; Cole, Goldberg, and White, 2004; Scott, 2004; Berger, Miller, Petersen, Rajan, and Stein, 2005). Specifically, these studies find that large financial institutions lend to larger, older firms with stronger financial ratios, while small institutions rely more on soft information and lend to firms with which they have stronger relationships. More recently, Gilje (2012) finds that local banking market structure matters the increase in funding to firms in externally dependent industries from positive local market deposit shocks is amplified in counties dominated by small banks. However, technological progress and deregulation may have made it easier for large banks to serve small, opaque firms using hard information. Frame, Srinivasan, and Woosley (2001), Frame, Padhi, and Woosley (2004), Berger, Frame, and Miller (2005), Berger and Udell (2006), and Berger and Black (2011) document that large banks appear able to serve opaque small businesses using credit scoring and fixed-asset lending technologies. Petersen and Rajan (2002), Hannan (2003), and Brevoort and Hannan (2006) find an increase in lending distances over time, and Frame, Padhi, and Woosley (2004) and DeYoung, Frame, Glennon, and Nigro (2011) find that the greater distances are associated with small business credit scoring. Berger, Goulding, and Rice (2014) find that small, 5

7 opaque firms are not more likely to choose community banks (small, single-market, local banks) as their main banks, and their relationships with community main banks are not stronger than those with large, multimarket, and nonlocal banks. Durguner (2012) shows that the importance of small business lending relationships in determining loan contract terms has diminished over time. Consistent with this, van Ewijk and Arnold (forthcoming) find that U.S. banks have shifted from relationship-oriented models towards transactions-oriented models over time. Finally, Berger, Rosen, and Udell (2007) find no significant effect of large bank local market share. Besides analyzing more recent data than most of the literature, our study differs by focusing on the most opaque small businesses, recent start-ups. We are also the first to explore whether the roles of small and large banks may be different in normal times and crisis times. 1 The paper proceeds as follows. Section 2 describes the data set and the variables used in the analysis. Section 3 presents our empirical methodology. Section 4 presents the results and Section 5 discusses some robustness tests. Section 6 concludes. II. Data and variables This paper uses confidential data from the Kauffman Firm Survey (KFS). The KFS is a longitudinal survey that collects information for a sample of 4,928 start-ups that began operations in 2004 in the United States and are followed annually. We use six years of data ( ). The KFS contains detailed information on the financial injections these firms receive in each year. The survey also provides detailed information on the firm, such as its credit history, geographic location, industry, and information on the owners, such as experience, 1 Our paper is also related to a recent literature that studies whether foreign banks are more likely to reduce lending during financial crises. The common finding is that foreign banks reduce lending more than domestic banks during crisis periods (Klein, Peek, and Rosengren, 2002, Ongena, Peydró, and van Horen, 2012, Popov and Udell, 2012, Claessens and Van Horen, 2014, de Haas and Lelyveld, 2014). 6

8 education, gender, race, and age. The KFS uses weights that make it representative of the population of start-ups in the US, and all of our analyses use these weights. Table 1 provides definitions of variables and summary statistics (means and standard deviations) for the period We report these statistics for the 3,297 firms of the baseline survey that either survived over the period, or were identified as going out of business over the same period. 2 We group our variables into five types: Dependent variables (firm financing and survival), a dummy for the crisis period of , structure and other characteristics of the banking market, local economic conditions, and firm and owner characteristics. Below, we describe separately the variables in each group. a) Dependent variables We employ the KFS to examine how the structure of the local banking market affects the financing amounts that firms obtain from banks. As noted in Robb and Robinson (2014), outside debt most of which is obtained from banks is the largest single financing category for these firms during their first year of operation. Moreover, bank financing quickly becomes the prominent source of funding for most firms as they grow (Cerqueiro and Penas, 2014). The details of the KFS allow us to break up bank financing according to two separate criteria. First, we separate credit obtained in the name of the firm s owner that is used to finance the firm s operations (Personal credit) from credit obtained in the name of the firm (Business credit). Personal credit may be more conducive to credit scoring because there is often more consumer information about the owner than business information about the firm. For this reason, 2 Each year there is some loss in sample size because some firm owners cannot be located, refuse to respond to the follow-up survey wave, or stop operations. The KFS contains response-adjusted weights designed to minimize potential non-response bias in the estimates (see DesRoches et al., 2010, for methodological details in the KFS). We use these weights in all of our analyses. 7

9 large banks may be equally or better able to provide this type of credit. In addition, while Personal credit is backed by the owner s wealth, Business credit is not always so due to the limited liability form of most firms. 3 This distinction is important to the extent that it allows for the use of the owner s home and other fixed assets as collateral (Berger and Black, 2011), which may reduce banks incentives to produce information (Manove, Padilla, and Pagano, 2001). In contrast, these assets are out of reach of the hands of creditors if the business and not its owner is liable for the incurred debts. 4 As a result, Business credit should carry greater risk to lenders and provide lenders with greater incentives to produce information about the firm and to engage in lending relationships, in which small banks may have a comparative advantage. Second, we provide an alternative categorization based on the three types of bank financing specified in the KFS: Term loans, Credit cards, and Business lines of credit. Term loans refers to the total term financing obtained via personal and business loans. Credit cards is the maximum credit limit on Personal and Business credit cards. Business lines of credit is the maximum credit limit on business lines of credit. For the two latter modes of credit, we prefer to analyze the size of the credit commitments rather than the actual amounts drawn, since the amounts drawn may be driven by demand. In contrast, the size of the credit commitments should be strongly correlated with the supply of credit, the main focus of our analysis. In light of the discussion above about lending technologies, we consider credit cards as a transactional mode of financing that depends mainly on the credit history of the firm s owner (and of the firm, as it builds one), and subject to credit scoring technology. In contrast, bank 3 In firms with unlimited liability form, all credits are de facto personal, since there is no legal distinction between the firm and the owner. However, some owners of unlimited liability firms in the KFS reported that they obtained Business credits. Our definition of Business credit is the same that is used in the KFS, i.e., we maintained selfreported Business credits granted to unlimited liability firms in the same category. 4 The firm owner is also liable for the Business credits whenever the owner personally guarantees such loans. The KFS does not provide information on the terms of the loans, such as the loan rate and the existence of personal guarantees or collateral. In addition, the KFS does not disclose the identity of the lenders. 8

10 term loans and especially business lines of credit should be seen as more information-intensive means of financing subject to the relationship lending technology (Berger and Udell, 1995). All bank financing variables are measured in terms of annual flows. In our regressions, we use as dependent variables the log of one plus the financing amounts. A more conventional approach would be to scale the financing amounts by a stock variable, such as total assets. However, such approach is impractical in the context of the KFS, because the survey s questions about financing sources and firm assets are framed in terms of annual flows. Another alternative would be to use the total asset value in 2004 (i.e., when firms are born) to create financing ratios. Again, such procedure would unlikely produce meaningful economic variables, because several of the start-ups in our sample report very small (or even zero) asset values in Moreover, many of these firms experience fast growth rates during their first years of operation. In these cases, the scaling factor total assets would fall short of its purpose, as the resulting ratios would be particularly inflated and subject to measurement error. 5 Finally, we also analyze how the structure of the local banking market affects firm survival. We define firm failure or non-survival with a dummy that indicates whether the firm went bankrupt or stopped operations. b) Crisis variable The dummy Crisis identifies years of crisis ( ), as opposed to non-crisis, or normal years ( ). We prefer this dummy to a full set of time dummies to facilitate the interpretation of our results. 5 The survey design ensures a high degree of comparability across firms, since all firms in the KFS are start-ups that were founded in Nevertheless, to reduce concerns that our results might be due to cross-sectional differences in firm size, we perform two robustness tests. First, we estimate regression models with firm fixed effects that use only within-firm variation. Second, we model our dependent variable as a binary indicator of whether or not the firm received a particular type of financing. We explain in detail our empirical methodology below. 9

11 c) Structure and other characteristics of the banking market We compute characteristics of the banking market using the Call Reports and the Summary of Deposits of the banks in the firms local markets. We measure banking market size structure in the local market using two categories of bank size: Small banks ( $1 billion in total assets) and Large banks (> $1 billion in total assets). The $1 billion threshold is measured in 2003 dollars. 6 The cutoff is motivated by the usual definition of community banks as those with assets of up to $1 billion (e.g., DeYoung, Hunter, and Udell 2004). The main variable of interest is % Small banks, which measures the percentage of branches in the local market that belong to small banks. Figure 1 shows that the fraction of small banks varies widely across markets. The definition of local market is the Metropolitan Statistical Area (MSA), New England County Metropolitan Areas (NECMA), or rural county where the firm is located. There are 828 banking markets in our sample, and the average number of different banks per market is 21.9 (with a median of 10 and a standard deviation of 47.3). The average number of small banks per market is 12.5 (with a median of 6 and a standard deviation of 26.5), while the average number of large banks per market is 9.5 (with a median of 4 and a standard deviation of 23.1). We also include a Herfindahl concentration index (HHI) to control for the level of concentration in the banking market. We compute the HHI in the local market using shares of deposits. The HHI is the most standard measure of market power used in bank research and antitrust analysis. Branches and deposits are the only bank variables for which location is available. Finally, we include in some specifications four additional characteristics of the local banking sector that might affect the provision of credit to small firms during normal times and the crisis. Specifically, we control for the (i) ratio of cash, cash equivalents, and securities to total 6 We adjust the variables using the implicit GDP price deflator. 10

12 assets, (ii) ratio of mortgage lending to total loans, (iii) Tier 1 capital ratio, and (iv) deposits to total loans. We measure these balance sheet variables at the holding company level as of 2003, and compute local branch-weighted averages (as in Popov and Udell, 2012). Our baseline regressions employ time-invariant market structure variables that are measured as of These pre-defined market structure variables should be reasonably exogenous in our empirical setting. However, we also want to investigate the effects of changes in banking market structure during our sample period. Consequently, in our robustness tests, we also compute time-varying market structure variables, which we lag one year to reduce endogeneity concerns. d) Local economic conditions We obtain from the 2000 Census two local economic measures, which we match at the ZIP code level with the firms in the KFS. Average house value is the average house value in the firm s ZIP code. Average income is the average income per household in the firm s ZIP code. These local measures should provide rich cross-sectional variation in local economic conditions that could be correlated with firms financing decisions. e) Firm and owner characteristics The KFS contains the commercial credit score class of the firm from Dun & Bradstreet, which ranges from 1 (minimum risk) to 5 (maximum risk). The credit scores are not available for about one fourth of our sample. The main reason for the missing credit scores is that Dun & Bradstreet sometimes did not have enough information to produce a score. We decompose the credit score variable into a set of mutually exclusive dummy variables, and make the missing credit score dummy the omitted category. 11

13 We also control for the legal form of the firm with a dummy that indicates whether the firm was set up as an unlimited liability firm (including all sole proprietorships and some partnerships). All regressions include also two-digit industry (SIC) codes, which we do not report for brevity. Finally, we include some characteristics of the firm s principal owner, 7 experience and education. We measure owner experience with two variables: the number of years of working experience of the firm owner, and a dummy that indicates whether the owner started other businesses in the same industry. We measure education with three dummies that indicate whether the owner obtained a high school diploma, a college diploma, or a graduate degree. III. Empirical methodology We investigate whether the presence of small banks has a differential effect in normal times ( ) versus crisis times ( ) on small firms financing and survival. We use the pre-defined market size structure of the banking industry as a source of exogenous variation in the supply of credit to small firms. The regression model we estimate is the following: Ln(1+Financing) it = b 0 + b 1 Crisis t + b 2 % Small banks i + b 3 Crisis t % Small banks i + Controls it + u it, where the dependent variable refers to the yearly inflow (or maximum limit) of financing from the following sources: Personal credit, Business credit, term loans, credit cards, and business lines of credit. The dummy variable Crisis identifies years of crisis ( ), as opposed to non-crisis years ( ). The key exogenous variable in our analysis, % Small banks, 7 For the one third of the firms in our sample with multiple owners, we designate the principal owner by largest equity share. In cases where two or more owners have similar equity shares, we identify the primary owner according to a number of other characteristics, such as the number of hours worked (see Robb and Robinson, 2014, for a detailed description of this methodology). 12

14 measures the relative presence of small banks in the firm s local market. The coefficient associated with this variable measures the effect of the presence of small banks on firm financing during normal times. The interaction term of Crisis and % Small banks allows us to test whether the effect of the presence of small banks on firm financing is different in crisis times versus normal times. In our regression tables, we also provide the estimated net effect of the presence of small banks in crisis times, obtained by summing coefficients b 2 and b 3. Controls refers to the set of remaining variables in Table 1. The error term is denoted by u. One implication of using a fixed panel of firms in our analysis is that we are effectively comparing the same sample of firms in two different periods ( and ). This raises the question of to what extent these sets of firms are comparable, since the 2007 firms might be larger and less opaque than they were on We collected additional information about these firms for the years 2004 and 2007 to inspect differences between the two samples. It turns out that the two samples of firms are not very different. For instance, the fraction of firms with a missing credit score is 23.8% in 2004, and 23.7% in The median number of employees is zero in both years, and the 75th percentile is also the same in both years (2 employees). This evidence suggests that our firms are in 2007 still very small and opaque. 8 Differences in loan portfolios and funding structure between small and large banks could determine their provision of credit in normal times and especially in times of crisis. For this reason, we also estimate regression models that include several characteristics of the banking markets, such as the share of liquid assets, the share of mortgage lending, capital ratio, and the 8 A related concern is that some firms stop operations or file for bankruptcy before the crisis period. We keep these firms in the sample, even after they failed (we assigned a zero to all financing variables). We do this to ensure that we are comparing a similar set of firms during normal times and during the crisis. However, we show in robustness tests that dropping these firms following bankruptcy does not affect our results. Our approach of keeping bankrupt firms in the sample is not novel. This practice is widely used in labor economics to deal with the issue that some workers become unemployed, in which case they are assigned a wage of zero (e.g., Jacobson, LaLonde, and Sullivan, 1993). This idea is also used in the finance literature on fund performance (e.g., Elton, Gruber, and Blake, 1996). 13

15 share of deposits. We allow these bank characteristics to have differential effects in normal times versus crisis times. We also estimate augmented versions of the above regression model that include interactions of the Crisis dummy with the local average house value, local average income, and industry dummies. The augmented specifications enable us to test for the potential presence of confounding demand-side factors that might be correlated with the presence of small banks. In particular, we worry that if small banks predominate in lower income areas, then a potential decrease in financing during the crisis could be due not to the banking market structure, but a more pronounced reduction in credit demand in these areas. Allowing the local average house value and local average income to have a differential effect on financing in normal times and in crisis times addresses directly such concerns. Our primary estimation method is to use a firm random effects model that accounts for the correlation in the error term resulting from multiple observations of the same firm. 9 We prefer this approach to a fixed effects approach, because the firm fixed effects do not allow us to identify the coefficients of our key variable % Small banks, which is time invariant (measured as of 2003). In robustness tests in which we allow % Small banks to change through time, we confirm that the two estimation methods provide similar results. We also analyze how banking market structure affects firm survival in normal times and in the crisis. We estimate logit regression models of the same form as the equation above, except that the dependent variable equals one when the firm went bankrupt or stopped operations. 9 The random effects model treats each firm as a cluster. It could be that the errors are also correlated at the banking market level. The use of survey weights does not allow us to estimate the random effects model with standard errors clustered at the market level. For this reason, we also estimate random effects models with standard errors clustered at the market level, but without the sample weights. Our results are similar in terms of both economic magnitude and statistical significance. We prefer to present the specifications containing sample weights, since it allows us draw correct statistical inference for the underlying population of start-ups. 14

16 IV. Results a) Market size structure: Baseline results We first study the effect of the market size structure on Personal credit versus Business credit. In the first and third specifications in Table 2, we do not include an interaction term between Crisis and % Small banks, focusing instead on whether the crisis years ( ) are different from normal years ( ), and on the average direct effect over time of the market size structure on Personal credit (Column 1) and on Business credit (Column 3). In the second and fourth specifications, we add the Crisis % Small banks interaction term to test whether there are any differential effects of the market size structure during crisis times for Personal credit (Column 2) and for Business credit (Column 4). All specifications are random effects models with robust standard errors. We control for local market characteristics, firm characteristics, owner characteristics, and industry fixed effects. Importantly, our local market characteristics include controls for market concentration (HHI) and for potential demand-side drivers of bank financing (average local house value and local average income). Our results in columns (1) and (3) show that during the crisis years, bank financing fell both in the case of Personal credit and Business credit (Column 1 and 3). Specifically, for the average firm, the flow of Personal credit decreased by an estimated 68%, while Business credit fell by an estimated 39%. 10 A larger presence of small banks in the local market does not affect Personal credit, but it does significantly increase the flow of Business credit. In economic terms, our results suggest that a one standard deviation increase in % Small banks increases Business 10 We obtain these economic effects by comparing the predicted amount of financing with Crisis = 1 versus the predicted value at Crisis = 0 at the mean values of all of the other exogenous variables. 15

17 credit by almost 16%. 11 We emphasize that these results hold after we control for measures of local demand (average income and average house value) and when we use a pre-defined market size structure (in 2003). We therefore argue that the fraction of branches operated by small banks is a source of exogenous variation in the supply of credit to small firms. One potential explanation of the different impact of market size structure on Personal versus Business credit may be related to owner versus business credit records. Older firms have longer track records and more publicly available information at the firm level than the recent start-ups in our sample. Benefits from small bank presence may be particularly important for start-ups for which little hard information is available at the firm level. In contrast, in the case of Personal credit, credit records for young firm owners may still be available, facilitating lending from large banks at the personal level based on hard information. The difference in our results from the previous research that found no effect of market size structure (Berger, Rosen, and Udell, 2007) may be due to the fact that our sample includes only very young firms with little business experience. The specifications in columns (2) and (4) address the issue of whether the beneficial effects of small banks are different in normal times and in crisis times. For Personal credit, we do not find any differential effect of market size structure. However, for Business credit, we find the effect of % Small banks to be strongly positive and significant only during normal times, with no impact during crisis times. Specifically, during normal times, a one standard deviation increase in % Small banks leads to an estimated increase in business lending of 29%. Firm characteristics are important determinants of bank financing. In particular, having a credit score significantly increases bank financing with respect to not having a score (omitted variable). Also, owner characteristics are important in increasing bank financing. More 11 We obtain this economic effect by comparing the predicted amount of financing with % Small banks = 0.69 (its mean of 0.54 plus its standard deviation of 0.15) versus the predicted value at % Small banks = 0.54 (its mean) at the mean values of all of the other exogenous variables. 16

18 experienced entrepreneurs (measured as years of working experience) and entrepreneurs with a college degree are more likely to receive Business credit. b) Controlling for other characteristics of the banking market So far our results indicate that having a large share of small banks in the locality of the firm increases business lending in normal times. However, the comparative advantage of small banks seems to disappear during times of crisis. We next investigate whether this reversal can be explained by differences between small and large banks in their lending portfolios and funding structure. For instance, it could be that localities with a large share of small banks are localities where banks are heavily exposed to the real estate sector. It is well possible that these small banks were forced to reduce lending during the crisis, which could explain the negative sign of the interaction of Crisis with % Small banks. In Table 3, we estimate regression models that control for the balance sheet structure of local banks, including the share of liquid assets, the share of mortgage lending, the Tier 1 capital ratio, and the share of deposits. As in Table 2, the first and third specifications in Table 3 focus on the average direct effect over time of the market size structure, and the specifications in columns (2) and (4) test whether the beneficial effects of small banks differ in normal times and crisis times, and therefore we interact the bank characteristics with the dummy Crisis only in these specifications. The results in columns (1) and (2) show that neither the presence of small banks nor the characteristics of the local banking market affect Personal credit, while the specifications in columns (3) and (4) show that these variables matter for Business credit. In particular, Business credit is significantly higher when banks hold less liquid assets and less real estate loans on their balance sheets, and significantly higher when banks hold more capital. After controlling for 17

19 these bank characteristics, we still find a positive and significant effect of % Small banks only in normal times. Moreover, the coefficient estimates are quantitatively similar to those we obtain in Table 2. Therefore, the variable % Small banks seems to be indeed picking up the comparative advantage of small banks, rather than other characteristics of the local banking market. One remaining question is why the positive effect of having a large share of small banks in the locality of the firm disappears during the crisis. Small banks are less diversified both geographically and across product lines and lost more from their concentrations in real estate loans during the crisis. Moreover, small banks may receive less explicit and implicit government guarantees during financial crises. As a result, small banks failed much more often during the financial crisis. These factors may have pressed small banks to adopt more conservative lending policies during crisis times. c) Controlling for demand-side effects In this section, we address the potential presence of demand-side effects in our results. As noted above, to address this potential concern that a change in credit demand during the recent crisis may be correlated with local banking market structure, we allow the local average house value, local average income, and the firm s industry to have differential effects on financing in normal times and in crisis times. Specification 1 (for Personal credit) and specification 3 (for Business credit) in Table 4 add interaction terms of Crisis with the Average house value and Average Income to the model in Table 2. Specifications 2 and 4 further add interactions of Crisis with the industry dummies. Table 4 shows that our main results hold when we add these interactions terms. In particular, we find that for Business credit, the coefficient of % Small Banks is again strongly positive and significant only during normal times, with no beneficial impact during crisis times. 18

20 d) Market size structure and different type of loans We now turn to a different loan classification that may provide further insights. In Table 5, we study the effect of market size structure on different types of loans that small firms obtain most frequently to fund their operations: term loans, credit cards, and business lines of credit. Term loans and credit cards can be both personal loans and business loans, while business lines of credit are by definition business loans. Importantly, for credit cards and business lines of credit, we disregard the information on the amounts used, which are largely demand-driven, and we focus on the information about the credit limits, which are set by the banks. In the first, third, and fifth specifications in Table 5, we focus on analyzing whether the crisis years are different from normal years, and on the average direct effect over time of the market size structure on Term loans (Column 1), on Credit card loans (Column 3), and on Business lines of credit (Column 5). In the second, fourth, and sixth specifications, we interact the dummy Crisis with % Small banks to test whether there are any differential effects of the market size structure during crisis times for Term loans (Column 2), for Credit card loans (Column 4), and for Business lines of credit (Column 6). As above, all specifications are random effects models with robust standard errors, and we control for local economic conditions, firm characteristics, owner characteristics, and industry effects (not shown). Our results show that during the crisis years, the flow of term loans (Column 1) and the size of credit card limits (Column 3) decreased significantly. We find no significant effect for the business lines of credit limits. A larger presence of small banks in the local market does not affect term loans and credit cards, but it does significantly increase the limits on business lines of credit. This result can be explained by the finding of the previous section: small bank presence seems to matter mainly for business loans, while an important fraction of term loans and credit card loans are actually personal loans. Furthermore, among the business loans, lines of credit 19

21 may be a more information-sensitive product (Berger and Udell, 1995), as in general the line of credit is not associated with a specific purpose and the borrower can withdraw funds at any time. The second, fourth, and sixth specifications address the issue of whether the beneficial effects of small banks may be different in normal times from crisis times for these types of loans. For credit cards, we do not find any differential effect of market size. However, for term loans and business lines of credit, we find that % Small banks is strongly positive and significant only during normal times, with no impact during crisis times. These results corroborate our earlier finding that the benefits of small banks for small, opaque firms holds only during normal times and is negated during the crisis. Among the local bank characteristics, higher concentration increases the amount of term loans, consistent with the argument in Petersen and Rajan (1995) that banks are more likely to finance relationship-based firms when credit markets are concentrated. As expected, higher average local house values increase bank financing, especially business lines of credit. In terms of firm characteristics, credit scores are again significant in explaining bank lending, showing that as the firm s risk increases, bank lending falls. Also, owner characteristics are important for bank financing. Owner s experience positively affects financing, but only through business lines of credit, while owners that have previously created firms in the same industry are negatively associated with credit card lending, perhaps due to overall credit card limits on the owner. Finally, more educated owners obtain significantly higher inflows of all three types of bank financing. e) Market size structure and firm failure In this section, we analyze how banking market structure affects firm survival in normal times and in the crisis. Table 6 reports three logit regression models where the dependent 20

22 variable equals one when the firm went bankrupt or stopped operations in that year. In the first specification, we test whether firm failure rates differed in normal years and in crisis years and analyze whether the market size structure has any effect on firm failure across time. The second specification allows for an interaction of the dummy Crisis with % Small banks to study whether the market size structure shows different effects on small firms failure rates in normal times and in crisis times. The third specification controls for the balance sheet structure of local banks, which includes the share of liquid assets, the share of mortgage lending, the Tier 1 capital ratio, and the share of deposits. We allow these bank characteristics to have differential effects on survival in normal times and in crisis times. The three specifications shown include the same set of control variables as Table 2. Our results show that during the crisis years, failure rates of small firms increased significantly (Column 1). Specifically, during crisis times, the probability of failure of the average firm increases by 4.7 percentage points. 12 The effect of % Small banks is negative, but not significant, suggesting that on average over time, there is no effect of the share of small banks on firm failure. However, the second specification uncovers a differential effect for normal times and crisis times. The effect of % Small banks is negative and marginally significant during normal times, while the positive and significant interaction term suggests that this effect is reversed during the crisis. Because the logit specification is nonlinear, we cannot simply add the coefficients to get the effect of % Small Banks during the crisis, so we use predicted probabilities instead. Based on predicted probabilities, our estimates indicate that a one standard deviation increase in % Small banks decreases the predicted probability of failure by 0.36 percentage points during normal times, while increasing it by 0.5 percentage points 12 We obtain this economic effect by comparing the predicted probabilities of failure of the model for zero and one values of the Crisis dummy, setting all other variables equal to their sample means. 21

23 during the crisis. These effects may be considered to be economically significant, given that the average annual failure rate in our sample is 10%. The third specification shows that our results are qualitatively unaffected by the inclusion of other characteristics of the local banking market. With respect to control variables, higher market concentration and higher average house values reduce the failure rates of small firms. In terms of firm characteristics, having a good credit score (Credit risk 1, 2, or 3) reduces firm failure relative to firms with no credit score. Firms with the worst possible credit score (Credit risk 5) are the ones with the highest failure rates. The estimates for the owner characteristics are sensible and in line with previous evidence. We find that start-ups founded by more experienced and educated owners are more likely to survive. This result confirms that human capital is an important determinant of firm survival (Cressy, 1996). Overall, our findings provide strong evidence that small banks lend more to young firms during normal times, leading to higher survival rates in normal times. However, these beneficial effects disappear or are reversed during crisis times. V. Robustness tests a) Time-varying structure of banking markets Our first robustness test is to let our banking market structure variables vary through time. To reduce endogeneity concerns, we lag these market structure variables one year. We show the results in Table 7. In the first and third specifications, we estimate random effects models using the same set of control variables as in Table 2. In the second and fourth specifications, we estimate fixed effects models, implying that identification in these models stems only from changes in the structure within banking markets. With the inclusion of firm 22

24 fixed effects, we can only add time-varying variables, which is why we only control for the firm s credit rating. The results corroborate our earlier findings that the effect of % Small banks on business credit is significant during normal times and not during crisis times. The results for personal credit show a similar pattern across the two specifications shown. This slight difference from our main results may reflect an endogeneity concern with using time-varying market structure local market conditions that change over time and affect small business financing may also affect % Small banks. b) Additional robustness tests We run several additional regressions to test the robustness of our findings. For brevity, we present in Table 8 the coefficient estimates only for our three main variables of interest (Crisis, % Small banks, and their interaction). First, we question our assumption that 2007 is the year of beginning of the crisis. Aggregate data show that loan volumes started to decline in the second half of 2007, around the third quarter (e.g., Ivashina and Sharfstein, 2010). To allow for the possibility that the firms in our sample were not affected until 2008, we only include 2008 and 2009 as crisis years in the regressions in columns 1 and 2. Our main results still hold. For Business credit, we find the effect of % Small banks to be strongly positive and significant only during normal times, with no impact during crisis times. Specifically, during normal times, a one standard deviation increase in % Small banks leads to a predicted increase in business lending of 18%. For Personal credit, 23

25 we do not find any effect of market size structure on lending during normal times or crisis times. 13 Second, we address the concern that some firms stop operations or file for bankruptcy before the crisis period. Recall that we keep these firms in the sample after they failed (we assigned a zero to all financing variables) to ensure that we are comparing a similar set of firms during normal times and during the crisis. Columns 3 and 4 show that our main results are virtually unaffected by the exclusion of bankrupt firms. Third, we exploit the growth of the firm as an alternative measure of a demand for credit. To this end, we compute the rate of growth of firm revenues and include it in columns 4 and 5 as an additional control variable. One caveat to adding this variable is that we lose the first year of our sample period. Our main results are nevertheless robust to the inclusion of the growth of firm revenues. Fourth, we also address potential econometric concerns pertaining to the definition of our dependent variables. As mentioned before, we express our financing variables in terms of annual flows, a decision mandated by the design of the KFS. Two concerns that emerge from such approach are the accumulation of zeroes in our financing variables and the effect of crosssectional differences in firm size on the estimates obtained. To address these concerns, we also estimate logit models where the dependent variables are dummies that indicate whether the firms obtained each particular type of financing. Columns 7 and 8 display the results. We obtain similar estimates for the logit models, indicating that differences in firm size do not drive our results. VI. Conclusions 13 We also perform this robustness test for our failure models displayed in Table 6. We obtain similar results and therefore we do not report them in the tables. 24

26 We use a longitudinal representative panel of small US start-up firms for the period to investigate how the presence of small banks affects these firms financing and survival in normal times ( ) and crisis times ( ). We find that while the greater market presence of small banks results in more lending to small, opaque firms during normal times, this differential effect disappears during the financial crisis. The comparative advantage of small banks in normal times holds mainly for business loans for which the borrowers are not personally liable. Moreover, our results hold only for more information-intensive loans, such as term loans and business lines of credit. Finally, we also show that a greater presence of small banks may have a small beneficial effect in terms of reducing the failure rate of small, opaque firms during normal times, but this effect is reversed during the recent financial crisis. Overall, our results provide strong evidence that small banks lend more to small, opaque firms than large banks, especially in the case of information-intensive loan products. However, the competitive advantage of small banks seems to vanish during crisis periods. Small banks are less diversified both geographically and across product lines, and they may benefit less than large banks from explicit and implicit government guarantees during financial crises. As a result, small banks failed much more often during the financial crisis. These factors may make them more cautious in their lending policies during crisis times. 25

27 References Berger, A., and Black, L. (2011). Bank size, lending technologies, and small business finance," Journal of Banking and Finance, 35(3), Berger, A., Frame, S., and Miller, N. (2005). Credit scoring and the availability, price, and risk of small business credit, Journal of Money, Credit, and Banking, 37, Berger, A., Goulding, W., and Rice, T. (2014). Do small businesses still prefer community banks?, Journal of Banking and Finance 44, Berger, A., Miller, N., Petersen, M., Rajan, R., and Stein, J. (2005). Does function follow organizational form? Evidence from the lending practices of large and small banks, Journal of Financial Economics, 76, Berger, A., Rosen, R., and Udell. G. (2007). "Does market size structure affect competition? The case of small business lending, Journal of Banking and Finance, 31(1), Berger, A., and Udell, G. (1995). Relationship lending and lines of credit in small firm finance, Journal of Business, 68(3), Berger, A., and Udell, G. (2002). Small business credit availability and relationship lending: The importance of bank organisational structure, Economic Journal, 112, F32-F53. Berger, A., and Udell, G. (2006). A more complete conceptual framework for SME finance, Journal of Banking and Finance, 30, Brevoort, K., and Hannan, T. (2006). Commercial lending and distance: Evidence from Community Reinvestment Act data, Journal of Money, Credit and Banking, 38, Cerqueiro, G., and Penas, M. (2014). How does personal bankruptcy law affects start-ups, Working paper. Claessens, S., and van Horen, N. (2014). Foreign banks: Trends and impact, Journal of Money, Credit and Banking, 46, Cole, R., Goldberg, L, and White, L. (2004). Cookie-cutter versus character: The micro structure of small business lending by large and small banks, Journal of Financial and Quantitative Analysis, 39, Cressy, R. (1996). "Are business startups debt-rationed?," Economic Journal, 106, DeYoung, R., Frame, S., Glennon, D., and Nigro, P. (2011). "The information revolution and small business lending: The missing evidence," Journal of Financial Services Research, 39, DeYoung, R., Hunter, W., and Udell, G. (2004). The past, present, and probable future for community banks, Journal of Financial Services Research, 25, Durguner, S. (2012). Effects of changes in borrower-lender relationships on small business loan contract terms and credit availability, Federal Deposit Insurance Corporation Working paper. 26

28 Elton, E., Gruber, M., and Blake, C. (1996). Survivorship Bias and Mutual Fund Performance, Review of Financial Studies, 9(4), Frame, S., Padhi, M., and Woosley, L., (2004). Credit scoring and the availability of small business credit in low- and moderate income areas, Financial Review, 39, Frame, S., Srinivasan, A., and Woosley, L. (2001). "The effect of credit scoring on small business lending," Journal of Money, Credit, and Banking, 33, Gilje. E. (2012). Does local access to finance matter?: Evidence from U.S. oil and natural gas shale booms, Working paper. de Haas, R., and van Lelyveld, I. (2014). Multinational banks and the global financial crisis: Weathering the perfect storm, Journal of Money, Credit and Banking, 46, Hannan, T. (2003). Non-local lending to small businesses, Journal of Financial Services Research, 24, Haynes, G., Ou, C., and Berney, R. (1999). Small business borrowing from large and small banks, in Business Access to Capital and Credit, edited by Blanton, J., Williams, A., Rhine, S., A Federal Reserve System Research Conference, Ivashina, V., and Scharfstein, D. (2010). "Bank lending during the financial crisis of 2008," Journal of Financial Economics, 97(3). Jacobson, L., LaLonde, R., and Sullivan, D. (1993). Earnings losses of displaced workers, The American Economic Review, 83(4), Kahle, K., and Stulz, R. (2013). Access to capital, investment, and the financial crisis, Journal of Financial Economics, 110, Klein, M., Peek, J., and Rosengren, E. (2002). Troubled banks, impaired foreign direct investment: The role of relative access to credit, The American Economic Review, 92(3), Liberti, J., and Mian, A. (2009). Estimating the effect of hierarchies on information use, Review of Financial Studies, 22, Manove, M., Padilla, J., and Pagano, M. (2001). Collateral versus project screening: A model of lazy banks, Rand Journal of Economics, 32(4), Ongena, S., Peydró, J., and Van Horen, N. (2012). Shocks abroad, pain at home? bank-firm level evidence on financial contagion during the recent financial crisis, Working paper. Petersen, M., and Rajan, R. (1995). The effect of credit market competition on lending relationships, The Quarterly Journal of Economics, 110(2), Petersen, M., and Rajan, R. (2002). Does distance still matter? The information revolution in small business lending, Journal of Finance, 57, Popov, A., and Udell, G. (2012). "Cross-border banking, credit access, and the financial crisis," Journal of International Economics, 87,

29 Robb, A., and Robinson, D. (2014). The capital structure decisions of new firms, Review of Financial Studies, 27, Scott, J. (2004). Small business and value of community financial institutions, Journal of Financial Services Research, 25, Stein, J. (2002). Information production and capital allocation: Decentralized vs. hierarchical firms, Journal of Finance, 57, van Ewijk, S., and Arnold, I., (forthcoming). How bank business models drive interest margins: Evidence from US bank-level data, The European Journal of Finance. Williamson, O. (1988). Corporate Finance and Corporate Governance, Journal of Finance, 43,

30 Figure 1 Distribution of % Small banks % Small banks is the percentage of branches in asset class $1 billion, as of the end of

Small Bank Comparative Advantages in Alleviating Financial Constraints and Providing Liquidity Insurance over Time

Small Bank Comparative Advantages in Alleviating Financial Constraints and Providing Liquidity Insurance over Time Small Bank Comparative Advantages in Alleviating Financial Constraints and Providing Liquidity Insurance over Time Allen N. Berger University of South Carolina Wharton Financial Institutions Center European

More information

Board of Governors of the Federal Reserve System. International Finance Discussion Papers. Number 1096. December 2013

Board of Governors of the Federal Reserve System. International Finance Discussion Papers. Number 1096. December 2013 Board of Governors of the Federal Reserve System International Finance Discussion Papers Number 1096 December 2013 Do Small Businesses Still Prefer Community Banks? Allen N. Berger, William Goulding, and

More information

Does Market Size Structure Affect Competition? The Case of Small Business Lending

Does Market Size Structure Affect Competition? The Case of Small Business Lending Does Market Size Structure Affect Competition? The Case of Small Business Lending Allen N. Berger Board of Governors of the Federal Reserve System Washington, DC 20551 U.S.A. Wharton Financial Institutions

More information

An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending

An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending Lamont Black* Indiana University Federal Reserve Board of Governors November 2006 ABSTRACT: This paper analyzes empirically the

More information

PRELIMINARY PLEASE DO NOT CITE OR CIRCULATE. Bank Size, Lending Technologies, and Small Business Finance

PRELIMINARY PLEASE DO NOT CITE OR CIRCULATE. Bank Size, Lending Technologies, and Small Business Finance PRELIMINARY PLEASE DO NOT CITE OR CIRCULATE Bank Size, Lending Technologies, and Small Business Finance Allen N. Berger University of South Carolina, Columbia, SC 29208 U.S.A. Wharton Financial Institutions

More information

Kauffman. Firm Survey. The Use of Credit Card Debt by New Firms. August 2009. Sixth in a series of reports using data from the Kauffman Firm Survey

Kauffman. Firm Survey. The Use of Credit Card Debt by New Firms. August 2009. Sixth in a series of reports using data from the Kauffman Firm Survey The Use of Credit Card Debt by New Firms Sixth in a series of reports using data from the Kauffman Firm Survey August 2009 The Kauffman Firm Survey 2004 2005 2006 2007 2008 2009 2010 2011 Prepared By:

More information

This version: August 12, 2010

This version: August 12, 2010 Bank size, lending technologies, and small business finance Allen N. Berger a,*, Lamont K. Black b a Moore School of Business, University of South Carolina, Columbia, SC 29208, U.S.A. a Wharton Financial

More information

Literature Review. Introduction

Literature Review. Introduction Literature Review Introduction An extensive literature on small business lending has examined the impacts of restructuring in the financial industry on banks capacities to satisfy credit needs of small

More information

EFFECTS OF BANK MERGERS AND ACQUISITIONS ON SMALL BUSINESS LENDING

EFFECTS OF BANK MERGERS AND ACQUISITIONS ON SMALL BUSINESS LENDING EFFECTS OF BANK MERGERS AND ACQUISITIONS ON SMALL BUSINESS LENDING Allen N. Berger Board of Governors of the Federal Reserve System Wharton Financial Institutions Center RIETI Policy Symposium Japan s

More information

Regression Analysis of Small Business Lending in Appalachia

Regression Analysis of Small Business Lending in Appalachia Regression Analysis of Small Business Lending in Appalachia Introduction Drawing on the insights gathered from the literature review, this chapter will test the influence of bank consolidation, credit

More information

Small Bank Comparative Advantage in Alleviating Financial Constraints and Providing Liquidity Insurance Over Time

Small Bank Comparative Advantage in Alleviating Financial Constraints and Providing Liquidity Insurance Over Time Small Bank Comparative Advantage in Alleviating Financial Constraints and Providing Liquidity Insurance Over Time Allen N. Berger University of South Carolina, Columbia, SC 29208 U.S.A. Wharton Financial

More information

Federal Reserve Bank of Chicago

Federal Reserve Bank of Chicago The Effect of Market Size Structure on Competition: The Case of Small Business Lending Federal Reserve Bank of Chicago By: Allen N. Berger, Richard J. Rosen, and Gregory F. Udell WP 2001-10 The Effect

More information

FEDERAL RESERVE BANK of ATLANTA

FEDERAL RESERVE BANK of ATLANTA FEDERAL RESERVE BANK of ATLANTA The Surprising Use of Credit Scoring in Small Business Lending by Community Banks and the Attendant Effects on Credit Availability and Risk Allen N. Berger, Adrian M. Cowan,

More information

Center for Economic Institutions Working Paper Series

Center for Economic Institutions Working Paper Series Does Market Size Structure Affect C Title Case of Small Business Lending Berger, Allen N.; Rosen, Richard J. Author(s) F. Citation Issue 2005-11 Date Type Technical Report Text Version publisher URL http://hdl.handle.net/10086/13493

More information

Borrower-lender distance and its impact on small business lenders during the financial crisis

Borrower-lender distance and its impact on small business lenders during the financial crisis Lakshmi Balasubramanyan (USA), Reza Houston (USA) Borrower-lender distance and its impact on small business lenders during the financial crisis Abstract In this study, we focus on the relationship between

More information

The Impact of Bank Consolidation on Small Business Credit Availability

The Impact of Bank Consolidation on Small Business Credit Availability The Impact of Bank Consolidation on Small Business Credit Availability by Steven G. Craig and Pauline Hardee Houston, TX for under contract number SBAHQ-02-M-0459 Release Date: February, 2004 The statements,

More information

Measuring BDC s impact on its clients

Measuring BDC s impact on its clients From BDC s Economic Research and Analysis Team July 213 INCLUDED IN THIS REPORT This report is based on a Statistics Canada analysis that assessed the impact of the Business Development Bank of Canada

More information

Kauffman. Firm Survey. Patterns of Financing: A Comparison between White- and African-American Young Firms. February 2009

Kauffman. Firm Survey. Patterns of Financing: A Comparison between White- and African-American Young Firms. February 2009 Patterns of Financing: A Comparison between White- and African-American Young Firms Fourth in a series of reports using data from the Kauffman Firm Survey February 2009 The Kauffman Firm Survey 2004 2005

More information

Chapter 5: Analysis of The National Education Longitudinal Study (NELS:88)

Chapter 5: Analysis of The National Education Longitudinal Study (NELS:88) Chapter 5: Analysis of The National Education Longitudinal Study (NELS:88) Introduction The National Educational Longitudinal Survey (NELS:88) followed students from 8 th grade in 1988 to 10 th grade in

More information

Data Appendix for Firm Age, Investment Opportunities, and Job Creation

Data Appendix for Firm Age, Investment Opportunities, and Job Creation Data Appendix for Firm Age, Investment Opportunities, and Job Creation Manuel Adelino Fuqua School of Business Duke University Song Ma Fuqua School of Business Duke University September 21, 2015 David

More information

HOW DID THE FINANCIAL CRISIS AFFECT SMALL-BUSINESS LENDING IN THE U.S.?

HOW DID THE FINANCIAL CRISIS AFFECT SMALL-BUSINESS LENDING IN THE U.S.? HOW DID THE FINANCIAL CRISIS AFFECT SMALL-BUSINESS LENDING IN THE U.S.? Rebel A. Cole Driehaus College of Business DePaul University Email: rcole@depaul.edu Presentation for the 2013 AIDEA Bicentenniel

More information

Does Distance Still Matter? The Information Revolution in Small Business Lending

Does Distance Still Matter? The Information Revolution in Small Business Lending THE JOURNAL OF FINANCE VOL. LVII, NO. 6 DECEMBER 2002 Does Distance Still Matter? The Information Revolution in Small Business Lending MITCHELL A. PETERSEN and RAGHURAM G. RAJAN* ABSTRACT The distance

More information

Startup Business Characteristics and Dynamics: A Data Analysis of the Kauffman Firm Survey

Startup Business Characteristics and Dynamics: A Data Analysis of the Kauffman Firm Survey Startup Business Characteristics and Dynamics: A Data Analysis of the Kauffman Firm Survey A Working Paper by Ying Lowrey Office of Advocacy for Release Date: August 2009 The statements, findings, conclusions,

More information

The merger boom in the U.S. banking industry has caused the

The merger boom in the U.S. banking industry has caused the Understanding the Effects of the Merger Boom on Community Banks By Julapa Jagtiani The merger boom in the U.S. banking industry has caused the number of banking organizations in the nation to fall by nearly

More information

W. Scott Frame Financial Economist and Associate Policy Advisor Federal Reserve Bank of Atlanta Atlanta, GA 30309 U.S.A. scott.frame@atl.frb.

W. Scott Frame Financial Economist and Associate Policy Advisor Federal Reserve Bank of Atlanta Atlanta, GA 30309 U.S.A. scott.frame@atl.frb. Credit Scoring and the Availability, Price, and Risk of Small Business Credit Allen N. Berger Senior Economist Board of Governors of the Federal Reserve System Washington, DC 20551 U.S.A. Senior Fellow

More information

How Do Start-Up Firms Finance Their Assets? Evidence from the Kauffman Firm Surveys

How Do Start-Up Firms Finance Their Assets? Evidence from the Kauffman Firm Surveys How Do Start-Up Firms Finance Their Assets? Evidence from the Kauffman Firm Surveys Rebel Cole DePaul University Chicago, IL 60404 phone: (312) 362-6887 fax: (312) 362-6566 rcole@depaul.edu Tatyana Sokolyk

More information

Bank Consolidation and Small Business Lending: The Role of Community Banks

Bank Consolidation and Small Business Lending: The Role of Community Banks Bank Consolidation and Small Business Lending: The Role of Community Banks Working Paper 2003-05 Robert B. Avery and Katherine A. Samolyk* October 2003 JEL Classification Codes: L1, L4, G2 * Contact information:

More information

The Impact of the Small Business Lending Fund on Community Bank Lending to Small Businesses

The Impact of the Small Business Lending Fund on Community Bank Lending to Small Businesses The Impact of the Small Business Lending Fund on Community Bank Lending to Small Businesses Dean Amel* Board of Governors of the Federal Reserve System Traci Mach* Board of Governors of the Federal Reserve

More information

Does Distance Still Matter? The Information Revolution in Small Business Lending

Does Distance Still Matter? The Information Revolution in Small Business Lending March 2001 Does Distance Still Matter? The Information Revolution in Small Business Lending Mitchell A. Petersen Kellogg Graduate School of Management Northwestern University and Raghuram G. Rajan Graduate

More information

Loan Officer Turnover and Credit Availability for Small Firms

Loan Officer Turnover and Credit Availability for Small Firms Journal of Small Business Management 2006 44(4), pp. 544 562 Loan Officer Turnover and Credit Availability for Small Firms by Jonathan A. Scott This paper presents empirical evidence on the role loan officers

More information

CHAPTER 2 LOAN DEMAND IN APPALACHIA

CHAPTER 2 LOAN DEMAND IN APPALACHIA CHAPTER 2 LOAN DEMAND IN APPALACHIA 2.1 INTRODUCTION AND SUMMARY This report has documented a significant decline in small business lending in the nation and in Appalachia. The percentage decline in lending

More information

Federal Reserve Bank of New York Staff Reports. Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession

Federal Reserve Bank of New York Staff Reports. Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession Federal Reserve Bank of New York Staff Reports Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession Nicola Cetorelli Linda S. Goldberg Staff Report no. 545 February

More information

Effective Federal Income Tax Rates Faced By Small Businesses in the United States

Effective Federal Income Tax Rates Faced By Small Businesses in the United States Effective Federal Income Tax Rates Faced By Small Businesses in the United States by Quantria Strategies, LLC Cheverly, MD 20785 for Under contract number SBAHQ-07-Q-0012 Release Date: April 2009 This

More information

Bank Consolidation and the Provision of Banking Services: The Case of Small Commercial Loans

Bank Consolidation and the Provision of Banking Services: The Case of Small Commercial Loans Bank Consolidation and the Provision of Banking Services: The Case of Small Commercial Loans by Robert B. Avery and Katherine Samolyk* December 2000 Robert B. Avery Federal Reserve Board Washington, DC

More information

The Financial Characteristics of Small Businesses

The Financial Characteristics of Small Businesses The Financial Characteristics of Small Businesses THE FINANCIAL CHARACTERISTICS OF SMALL BUSINESSES Susan Black, Amy Fitzpatrick, Rochelle Guttmann and Samuel Nicholls This paper covers a number of topics

More information

The Surprising Use of Credit Scoring in Small Business Lending by Community Banks and the Attendant Effects on Credit Availability and Risk

The Surprising Use of Credit Scoring in Small Business Lending by Community Banks and the Attendant Effects on Credit Availability and Risk The Surprising Use of Credit Scoring in Small Business Lending by Community Banks and the Attendant Effects on Credit Availability and Risk Allen Berger University of South Carolina Wharton Financial Institutions

More information

American Finance Association

American Finance Association American Finance Association Does Distance Still Matter? The Information Revolution in Small Business Lending Author(s): Mitchell A. Petersen and Raghuram G. Rajan Source: The Journal of Finance, Vol.

More information

THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA

THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA Abstract THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA Dorina CLICHICI 44 Tatiana COLESNICOVA 45 The purpose of this research is to estimate the impact of several

More information

Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence from the Survey of Consumer Finances

Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence from the Survey of Consumer Finances Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence from the Survey of Consumer Finances Arthur B. Kennickell Myron L. Kwast Jonathan Pogach August

More information

Market Power and Relationships in Small Business Lending

Market Power and Relationships in Small Business Lending FEDERAL RESERVE BANK OF SAN FRANCISCO WORKING PAPER SERIES Market Power and Relationships in Small Business Lending Elizabeth Laderman Federal Reserve Bank of San Francisco November 2006 Working Paper

More information

How Does Personal Bankruptcy Law Affect Start-ups?

How Does Personal Bankruptcy Law Affect Start-ups? How Does Personal Bankruptcy Law Affect Start-ups? Geraldo Cerqueiro Universidade Católica Portuguesa M. Fabiana Penas Tilburg University CentER, EBC, and TILEC EIF April 24, 2012 This paper Exploits the

More information

Export Pricing and Credit Constraints: Theory and Evidence from Greek Firms. Online Data Appendix (not intended for publication) Elias Dinopoulos

Export Pricing and Credit Constraints: Theory and Evidence from Greek Firms. Online Data Appendix (not intended for publication) Elias Dinopoulos Export Pricing and Credit Constraints: Theory and Evidence from Greek Firms Online Data Appendix (not intended for publication) Elias Dinopoulos University of Florida Sarantis Kalyvitis Athens University

More information

THREE ESSAYS IN APPLIED FINANCE SENA DURGUNER DISSERTATION

THREE ESSAYS IN APPLIED FINANCE SENA DURGUNER DISSERTATION 2012 Sena Durguner THREE ESSAYS IN APPLIED FINANCE BY SENA DURGUNER DISSERTATION Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Agricultural and Applied

More information

Who Needs Credit and Who Gets Credit? Evidence from the Surveys of Small Business Finances

Who Needs Credit and Who Gets Credit? Evidence from the Surveys of Small Business Finances Who Needs Credit and Who Gets Credit? Evidence from the Surveys of Small Business Finances Rebel A. Cole Krähenbühl Global Consulting 130 N. Garland Court Suite 1703 Chicago, IL 60602 Office: (312) 242-1796

More information

Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C.

Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. Small Businesses and Small Business Finance during the Financial

More information

THE DIFFUSION OF FINANCIAL INNOVATIONS: AN EXAMINATION OF THE ADOPTION OF SMALL BUSINESS CREDIT SCORING BY LARGE BANKING ORGANIZATIONS

THE DIFFUSION OF FINANCIAL INNOVATIONS: AN EXAMINATION OF THE ADOPTION OF SMALL BUSINESS CREDIT SCORING BY LARGE BANKING ORGANIZATIONS THE DIFFUSION OF FINANCIAL INNOVATIONS: AN EXAMINATION OF THE ADOPTION OF SMALL BUSINESS CREDIT SCORING BY LARGE BANKING ORGANIZATIONS Jalal Akhavein Moody s Risk Management Services W. Scott Frame Research

More information

HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007

HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007 HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007 IPP Policy Briefs n 10 June 2014 Guillaume Bazot www.ipp.eu Summary Finance played an increasing

More information

1 Determinants of small business default

1 Determinants of small business default Els UK Ch01-H8158 RMV 13-8-2007 5:59p.m. Page:1 Trim:165 234MM Float: Top/Bot T.S: Integra, India 1 Determinants of small business default Sumit Agarwal, Souphala Chomsisengphet and Chunlin Liu Abstract

More information

Issue Brief. Access to Capital for Women- and Minority-owned Businesses: Revisiting Key Variables. Advocacy: the voice of small business in government

Issue Brief. Access to Capital for Women- and Minority-owned Businesses: Revisiting Key Variables. Advocacy: the voice of small business in government Issue Brief Advocacy: the voice of small business in government Issue Brief Number 3 Access to Capital for Women- and Minority-owned Businesses: Revisiting Key Variables By Christine Kymn At A Glance Small

More information

Financial Capital Injections among New Black and White Business Ventures: Evidence from the Kauffman Firm Survey

Financial Capital Injections among New Black and White Business Ventures: Evidence from the Kauffman Firm Survey Financial Capital Injections among New Black and White Business Ventures: Evidence from the Kauffman Firm Survey Alicia M. Robb University of California, Santa Cruz Robert W. Fairlie University of California,

More information

Medical Bills and Bankruptcy Filings. Aparna Mathur 1. Abstract. Using PSID data, we estimate the extent to which consumer bankruptcy filings are

Medical Bills and Bankruptcy Filings. Aparna Mathur 1. Abstract. Using PSID data, we estimate the extent to which consumer bankruptcy filings are Medical Bills and Bankruptcy Filings Aparna Mathur 1 Abstract Using PSID data, we estimate the extent to which consumer bankruptcy filings are induced by high levels of medical debt. Our results suggest

More information

Chapter 2 Financial Innovation, Organizations, and Small Business Lending

Chapter 2 Financial Innovation, Organizations, and Small Business Lending Chapter 2 Financial Innovation, Organizations, and Small Business Lending Gregory F. Udell Abstract Technological innovation and changes in bank organizational structure have each had a significant effect

More information

WOMEN-OWNED BUSINESSES AND ACCESS TO BANK CREDIT: A TIME SERIES PERSPECTIVE

WOMEN-OWNED BUSINESSES AND ACCESS TO BANK CREDIT: A TIME SERIES PERSPECTIVE WOMEN-OWNED BUSINESSES AND ACCESS TO BANK CREDIT: A TIME SERIES PERSPECTIVE Monica Zimmerman Treichel Temple University Fox School of Business and Management Strategic Management Department 1810 North

More information

FRBSF ECONOMIC LETTER

FRBSF ECONOMIC LETTER FRBSF ECONOMIC LETTER 211-32 October 17, 211 Recent Trends in Small Business Lending BY LIZ LADERMAN AND JAMES GILLAN Although bank small business loan portfolios continue to shrink, there are hints of

More information

Distribution of Household Wealth in the U.S.: 2000 to 2011

Distribution of Household Wealth in the U.S.: 2000 to 2011 Distribution of Household Wealth in the U.S.: By Marina Vornovitsky, Alfred Gottschalck, and Adam Smith Household net worth, or wealth, is an important indicar of economic well-being in the United States.

More information

Small Business Credit

Small Business Credit Small Business Credit Federal Reserve Bank of Atlanta s Regional Economic Information Network (REIN) April 2010 Survey Participants Industry distribution of small business survey participants n=311 firms

More information

Online Appendix. Banks Liability Structure and Mortgage Lending. During the Financial Crisis

Online Appendix. Banks Liability Structure and Mortgage Lending. During the Financial Crisis Online Appendix Banks Liability Structure and Mortgage Lending During the Financial Crisis Jihad Dagher Kazim Kazimov Outline This online appendix is split into three sections. Section 1 provides further

More information

State Farm Bank, F.S.B.

State Farm Bank, F.S.B. State Farm Bank, F.S.B. 2015 Annual Stress Test Disclosure Dodd-Frank Act Company Run Stress Test Results Supervisory Severely Adverse Scenario June 25, 2015 1 Regulatory Requirement The 2015 Annual Stress

More information

Dollar Funding and the Lending Behavior of Global Banks. Victoria Ivashina David Scharfstein Jeremy Stein

Dollar Funding and the Lending Behavior of Global Banks. Victoria Ivashina David Scharfstein Jeremy Stein Dollar Funding and the Lending Behavior of Global Banks Victoria Ivashina David Scharfstein Jeremy Stein Questions How do shocks to the ability of a foreign bank to raise dollar affect its lending - to

More information

Credit Scoring and the Availability, Price, and Risk of Small Business Credit

Credit Scoring and the Availability, Price, and Risk of Small Business Credit Credit Scoring and the Availability, Price, and Risk of Small Business Credit Allen N. Berger Board of Governors of the Federal Reserve System Washington, DC 20551 U.S.A. Wharton Financial Institutions

More information

The number of U.S. banks has trended lower over the past 30

The number of U.S. banks has trended lower over the past 30 Bank Consolidation and Merger Activity Following the Crisis By Michal Kowalik, Troy Davig, Charles S. Morris, and Kristen Regehr The number of U.S. banks has trended lower over the past 30 years, dropping

More information

4. The minimum amount of owners' equity in a bank mandated by regulators is called a requirement. A) reserve B) margin C) liquidity D) capital

4. The minimum amount of owners' equity in a bank mandated by regulators is called a requirement. A) reserve B) margin C) liquidity D) capital Chapter 4 - Sample Questions 1. Quantitative easing is most closely akin to: A) discount lending. B) open-market operations. C) fractional-reserve banking. D) capital requirements. 2. Money market mutual

More information

COMPETITIVE AND SPECIAL COMPETITIVE OPPORTUNITY GAP ANALYSIS OF THE 7(A) AND 504 PROGRAMS

COMPETITIVE AND SPECIAL COMPETITIVE OPPORTUNITY GAP ANALYSIS OF THE 7(A) AND 504 PROGRAMS COMPETITIVE AND SPECIAL COMPETITIVE OPPORTUNITY GAP ANALYSIS OF THE 7(A) AND 504 PROGRAMS Final Report January 2008 Prepared for: U.S. Small Business Administration Prepared by: The Urban Institute 2100

More information

Do SBA Loans Create Jobs?

Do SBA Loans Create Jobs? Do SBA Loans Create Jobs? Estimates from Universal Firm-Level Panel Data and Longitudinal Matching Methods J. David Brown Center for Economic Studies US Census Bureau John S. Earle George Mason University

More information

Discrimination in Access to Finance: Evidence from the United States Small Business Credit Market

Discrimination in Access to Finance: Evidence from the United States Small Business Credit Market Running head: DISCRIMINATION IN ACCESS TO FINANCE 1 Discrimination in Access to Finance: Evidence from the United States Small Business Credit Market Ethan Yiqi Pan Advisor: Shannon Mudd Haverford College

More information

OneWest Bank N. A. Dodd-Frank Act Stress Test Disclosure

OneWest Bank N. A. Dodd-Frank Act Stress Test Disclosure OneWest Bank N. A. Dodd-Frank Act Stress Test Disclosure Capital Stress Testing Results Covering the Time Period October 1, through December 31, for OneWest Bank N.A. under a Hypothetical Severely Adverse

More information

Banks Exposure to Interest Rate Risk and The Transmission of Monetary Policy:

Banks Exposure to Interest Rate Risk and The Transmission of Monetary Policy: Banks Exposure to Interest Rate Risk and The Transmission of Monetary Policy: Augustin Landier David Sraer David Thesmar May 22, 2012 Abstract This paper offers a new test of the lending channel view,

More information

The Business Credit Index

The Business Credit Index The Business Credit Index April 8 Published by the Credit Management Research Centre, Leeds University Business School April 8 1 April 8 THE BUSINESS CREDIT INDEX During the last ten years the Credit Management

More information

Working Paper Series

Working Paper Series The Effect of Credit Scoring on Small Business Lending in Low- and Moderate-Income Areas W. Scott Frame, Machael Padhi, and Lynn Woosley Working Paper 2001-6 April 2001 Working Paper Series The Effect

More information

Notation. Entrepreneurs Undertake the project if. Total deposits. Sum of all deposits except bank i. Sum of all loans except bank i

Notation. Entrepreneurs Undertake the project if. Total deposits. Sum of all deposits except bank i. Sum of all loans except bank i Banking Crises and Crisis Dating: Theory and Evidence John Boyd University of Minnesota, Department of Finance Gianni De Nicolò IMF, Research Department Elena Loukoianova EBRD, Evaluation Department http://www.imf.org/external/pubs/cat/longres.cfm?sk=23052.0

More information

Bank Consolidation and Small Business Lending within Local Markets

Bank Consolidation and Small Business Lending within Local Markets Bank Consolidation and Small Business Lending within Local Markets April 2003 Working Paper 2003-02 Katherine Samolyk Division of Insurance and Research Federal Deposit Insurance Corporation Washington,

More information

Trade credit and financial distress. Emilia Garcia-Appendini Judit Montoriol-Garriga. This draft: June 16, 2014

Trade credit and financial distress. Emilia Garcia-Appendini Judit Montoriol-Garriga. This draft: June 16, 2014 Trade credit and financial distress Emilia Garcia-Appendini Judit Montoriol-Garriga This draft: June 16, 2014 Abstract Using a sample of firms matched with their suppliers, we study the evolution of the

More information

Credit Card Market Study Interim Report: Annex 4 Switching Analysis

Credit Card Market Study Interim Report: Annex 4 Switching Analysis MS14/6.2: Annex 4 Market Study Interim Report: Annex 4 November 2015 This annex describes data analysis we carried out to improve our understanding of switching and shopping around behaviour in the UK

More information

Earnings in private jobs after participation to post-doctoral programs : an assessment using a treatment effect model. Isabelle Recotillet

Earnings in private jobs after participation to post-doctoral programs : an assessment using a treatment effect model. Isabelle Recotillet Earnings in private obs after participation to post-doctoral programs : an assessment using a treatment effect model Isabelle Recotillet Institute of Labor Economics and Industrial Sociology, UMR 6123,

More information

On the Growth Effect of Stock Market Liberalizations

On the Growth Effect of Stock Market Liberalizations On the Growth Effect of Stock Market Liberalizations Nandini Gupta and Kathy Yuan July 2008 Nandini Gupta (Email: nagupta@indiana.edu) is at the Kelley School of Business at Indiana University. Kathy Yuan

More information

``New'' data sources for research on small business nance

``New'' data sources for research on small business nance Journal of Banking & Finance 22 (1998) 1067±1076 ``New'' data sources for research on small business nance John D. Wolken * Board of Governors of the Federal Reserve System, Mail Stop 149, Federal Reserve

More information

crisis and the availability of small credit

crisis and the availability of small credit The 2007 2008 financial crisis and the availability of small business credit Abstract Burak Dolar Western Washington University Fang Yang University of Detroit Mercy Journal of Finance and Accountancy

More information

The Impact of Interest Rate Shocks on the Performance of the Banking Sector

The Impact of Interest Rate Shocks on the Performance of the Banking Sector The Impact of Interest Rate Shocks on the Performance of the Banking Sector by Wensheng Peng, Kitty Lai, Frank Leung and Chang Shu of the Research Department A rise in the Hong Kong dollar risk premium,

More information

Finding the Right Financing Mix: The Capital Structure Decision. Aswath Damodaran 1

Finding the Right Financing Mix: The Capital Structure Decision. Aswath Damodaran 1 Finding the Right Financing Mix: The Capital Structure Decision Aswath Damodaran 1 First Principles Invest in projects that yield a return greater than the minimum acceptable hurdle rate. The hurdle rate

More information

Flight to Where? Evidence from Bank Investments During the Financial Crisis

Flight to Where? Evidence from Bank Investments During the Financial Crisis Flight to Where? Evidence from Bank Investments During the Financial Crisis Thomas Hildebrand, Jorg Rocholl and Alexander Schulz Discussion by Neeltje van Horen De Nederlandsche Bank GLOBAL RESEARCH FORUM

More information

Kauffman Dissertation Executive Summary

Kauffman Dissertation Executive Summary Kauffman Dissertation Executive Summary Part of the Ewing Marion Kauffman Foundation s Emerging Scholars initiative, the Kauffman Dissertation Fellowship Program recognizes exceptional doctoral students

More information

Comment On: Reducing Foreclosures by Christopher Foote, Kristopher Gerardi, Lorenz Goette and Paul Willen

Comment On: Reducing Foreclosures by Christopher Foote, Kristopher Gerardi, Lorenz Goette and Paul Willen Comment On: Reducing Foreclosures by Christopher Foote, Kristopher Gerardi, Lorenz Goette and Paul Willen Atif Mian 1 University of Chicago Booth School of Business and NBER The current global recession

More information

SURVEY ON HOW COMMERCIAL BANKS DETERMINE LENDING INTEREST RATES IN ZAMBIA

SURVEY ON HOW COMMERCIAL BANKS DETERMINE LENDING INTEREST RATES IN ZAMBIA BANK Of ZAMBIA SURVEY ON HOW COMMERCIAL BANKS DETERMINE LENDING INTEREST RATES IN ZAMBIA September 10 1 1.0 Introduction 1.1 As Government has indicated its intention to shift monetary policy away from

More information

Bankruptcy and Small Firms Access to Credit

Bankruptcy and Small Firms Access to Credit Bankruptcy and Small Firms Access to Credit Jeremy Berkowitz Federal Reserve Board and Michelle J. White University of Michigan June 2000 Contact Address: Prof. Michelle White Dept. of Economics Univ.

More information

The financial progress of pure-play internet banks

The financial progress of pure-play internet banks The financial progress of pure-play internet banks Robert DeYoung 1 1. Introduction The internet has become a major distribution channel for US banks. Most internet banks use a clicks and mortar banking

More information

FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina

FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina Paula Bustos CREI and Universitat Pompeu Fabra September 2007 Abstract In this paper I analyze the financing and

More information

Social Security Eligibility and the Labor Supply of Elderly Immigrants. George J. Borjas Harvard University and National Bureau of Economic Research

Social Security Eligibility and the Labor Supply of Elderly Immigrants. George J. Borjas Harvard University and National Bureau of Economic Research Social Security Eligibility and the Labor Supply of Elderly Immigrants George J. Borjas Harvard University and National Bureau of Economic Research Updated for the 9th Annual Joint Conference of the Retirement

More information

The New FDIC Insurance Premium Assessments: A Better Way Scott Hein and Timothy Koch April 6, 2009

The New FDIC Insurance Premium Assessments: A Better Way Scott Hein and Timothy Koch April 6, 2009 The New FDIC Insurance Premium Assessments: A Better Way Scott Hein and Timothy Koch April 6, 2009 Effective January 1, 2009 the FDIC increased the annual insurance assessment rate by 7 basis points applied

More information

Small Business Borrowing and the Owner Manager Agency Costs: Evidence on Finnish Data. Jyrki Niskanen Mervi Niskanen 10.11.2005

Small Business Borrowing and the Owner Manager Agency Costs: Evidence on Finnish Data. Jyrki Niskanen Mervi Niskanen 10.11.2005 Small Business Borrowing and the Owner Manager Agency Costs: Evidence on Finnish Data Jyrki Niskanen Mervi Niskanen 10.11.2005 Abstract. This study investigates the impact that managerial ownership has

More information

The Financial Position of Australian Unlisted Businesses

The Financial Position of Australian Unlisted Businesses The Financial Position of Australian Unlisted Businesses Tom Bilston and Melissa Watson* Using a variety of information sources, the financial position of unlisted firms in recent years is examined and

More information

NEWS RELEASE BNCCORP, INC. REPORTS THIRD QUARTER NET INCOME OF $1.9 MILLION, OR $0.40 PER DILUTED SHARE SERIES A PREFERRED STOCK TO BE REDEEMED

NEWS RELEASE BNCCORP, INC. REPORTS THIRD QUARTER NET INCOME OF $1.9 MILLION, OR $0.40 PER DILUTED SHARE SERIES A PREFERRED STOCK TO BE REDEEMED NEWS RELEASE FOR FURTHER INFORMATION: WEBSITE: www.bnccorp.com TIMOTHY J. FRANZ, CEO TELEPHONE: (612) 305-2213 DANIEL COLLINS, CFO TELEPHONE: (612) 305-2210 BNCCORP, INC. REPORTS THIRD QUARTER NET INCOME

More information

The Determinants and the Value of Cash Holdings: Evidence. from French firms

The Determinants and the Value of Cash Holdings: Evidence. from French firms The Determinants and the Value of Cash Holdings: Evidence from French firms Khaoula SADDOUR Cahier de recherche n 2006-6 Abstract: This paper investigates the determinants of the cash holdings of French

More information

Migration, spillovers, and trade diversion: The impact of internationalization on domestic stock market activity

Migration, spillovers, and trade diversion: The impact of internationalization on domestic stock market activity Journal of Banking & Finance 31 (2007) 1595 1612 www.elsevier.com/locate/jbf Migration, spillovers, and trade diversion: The impact of internationalization on domestic stock market activity Ross Levine

More information

FRBSF ECONOMIC LETTER

FRBSF ECONOMIC LETTER FRBSF ECONOMIC LETTER 2012-25 August 20, 2012 Consumer Debt and the Economic Recovery BY JOHN KRAINER A key ingredient of an economic recovery is a pickup in household spending supported by increased consumer

More information

A Preliminary Causal Analysis of Small Business Access to Credit during Economic Expansion and Contraction

A Preliminary Causal Analysis of Small Business Access to Credit during Economic Expansion and Contraction Journal of Applied Finance & Banking, vol. 3, no. 5, 2013, 77-84 ISSN: 1792-6580 (print version), 1792-6599 (online) Scienpress Ltd, 2013 A Preliminary Causal Analysis of Small Business Access to Credit

More information

On the Dual Effect of Bankruptcy

On the Dual Effect of Bankruptcy On the Dual Effect of Bankruptcy Daiki Asanuma Abstract This paper examines whether the survival of low-productivity firms in Japan has prevented economic recovery since the bursting of the financial bubble

More information

REMITTANCE TRANSFERS TO ARMENIA: PRELIMINARY SURVEY DATA ANALYSIS

REMITTANCE TRANSFERS TO ARMENIA: PRELIMINARY SURVEY DATA ANALYSIS REMITTANCE TRANSFERS TO ARMENIA: PRELIMINARY SURVEY DATA ANALYSIS microreport# 117 SEPTEMBER 2008 This publication was produced for review by the United States Agency for International Development. It

More information

Financial Impacts from Farmland Value Declines by Various Farm Ownership Levels (AEC 2013-05)

Financial Impacts from Farmland Value Declines by Various Farm Ownership Levels (AEC 2013-05) Financial Impacts from Value Declines by Various Farm Ownership Levels (AEC 2013-05) By Cory Walters and John Barnhart 1 Long-term farm financial strength stemming from investment decisions is a primary

More information

BANK INTEREST RATES ON NEW LOANS TO NON-FINANCIAL CORPORATIONS ONE FIRST LOOK AT A NEW SET OF MICRO DATA*

BANK INTEREST RATES ON NEW LOANS TO NON-FINANCIAL CORPORATIONS ONE FIRST LOOK AT A NEW SET OF MICRO DATA* BANK INTEREST RATES ON NEW LOANS TO NON-FINANCIAL CORPORATIONS ONE FIRST LOOK AT A NEW SET OF MICRO DATA* Carlos Santos** 127 Articles Abstract This note aims at contributing to the assessment of the empirical

More information

Bank Consolidation and Loan Pricing

Bank Consolidation and Loan Pricing Bank Consolidation and Loan Pricing Lili Xie Abstract This paper examines the effects of bank mergers on loan pricing. Using a sample of U.S. commercial and industrial loans, I find that banks reduce loan

More information