Business Microloans for U.S. Subprime Borrowers
University of Texas at Austin
Mark J. Garmaise
University of California, Los Angeles (UCLA) - Anderson School of Management
Interdisciplinary Center (IDC) Herzliyah - Arison School of Business; University of Texas at Austin - Red McCombs School of Business
Universidad de Piura
Journal of Financial and Quantitative Analysis (JFQA), 51 (1), 55-83, February 2016
We show that business microloans to U.S. subprime borrowers have a very large impact on subsequent firm success. Using data on startup loan applicants from a lender that employed an automated algorithm in its application review, we implement a regression discontinuity design assessing the causal impact of receiving a loan on firms. Startups receiving funding are dramatically more likely to survive, enjoy higher revenues and create more jobs. Loans are more consequential for survival among subprime business owners with more education and less managerial experience.
Number of Pages in PDF File: 50
JEL Classification: G32, L26, M13
Date posted: October 6, 2012 ; Last revised: April 13, 2016
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