Competition, Small Business Financing, and Discrimination: Evidence from a New Survey

Abstract:     
We analyze credit applications, loan denials, andinterest rates paid by small businesses across owner gender, race, andethnicity. In addition, we examine data from owners who said they did not applyfor credit because they believed that their applications would have been turneddown. After controlling for a rich set of explanatory variables, includingpersonal and business credit histories, substantial differences in denial ratesbetween firms owned by African Americans and white males remain. Moreover,consistent with Becker's classic theories (1957), we find evidence thatincreases in competition in the firm's local banking market reduces thesedifferences. (Publication abstract)

Keywords: National Survey of Small Business Finances (Federal Reserve Board), Gender, Credit discrimination, Debt financing, Ethnic & racial groups, Individual traits, African Americans, Females

Accepted Paper Series