Abstract

http://ssrn.com/abstract=2149904
 


 



Banking Deregulation, Local Credit Supply, and Small Business Growth


Prasad Krishnamurthy


U.C. Berkeley School of Law; University of California, Berkeley - School of Law, Berkeley Center for Law, Business and the Economy ; University of California, Berkeley

August 15, 2013


Abstract:     
I show that the deregulation of bank branching in the United States lowered the sensitivity of small business growth to local credit supply. In urban markets, within-state deregulation of branching resulted in an 80% decrease in the effect of local deposit growth on the growth of establishments with 20-99 employees. Across-state deregulation had an effect of comparable size in county markets. I fi…nd effects of similar magnitude using employment growth and payroll growth as measures of business growth. Using the history of litigation over the scope of state bank regulation, I show these results continue to hold for states that deregulated branching for reasons that were unrelated to economic conditions. These fi…ndings suggest that bank deregulation played an important role in insuring small businesses against local shocks to credit supply.

Number of Pages in PDF File: 49

Keywords: banking, deregulation, growth, credit

JEL Classification: G21, G28, E32

working papers series


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Date posted: September 20, 2012 ; Last revised: January 15, 2014

Suggested Citation

Krishnamurthy, Prasad, Banking Deregulation, Local Credit Supply, and Small Business Growth (August 15, 2013). Available at SSRN: http://ssrn.com/abstract=2149904 or http://dx.doi.org/10.2139/ssrn.2149904

Contact Information

Prasad Krishnamurthy (Contact Author)
U.C. Berkeley School of Law ( email )
Boalt Hall
Berkeley, CA 94720-7200
United States
University of California, Berkeley - School of Law, Berkeley Center for Law, Business and the Economy ( email )
Berkeley, CA 94720-7200
University of California, Berkeley ( email )
310 Barrows Hall
Berkeley, CA 94720
United States
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