Banking Deregulations, Financing Constraints and Firm Entry Size

13 Pages Posted: 1 Aug 2009 Last revised: 13 Jan 2015

See all articles by William Kerr

William Kerr

Harvard University - Entrepreneurial Management Unit

Ramana Nanda

Harvard University - Entrepreneurial Management Unit

Multiple version iconThere are 2 versions of this paper

Date Written: October 14, 2009

Abstract

We examine the effect of US branch banking deregulations on the entry size of new firms using micro-data from the US Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, among firms that survived at least four years, a greater proportion of firms entered either at their maximum size or closer to the maximum size in the first year. The magnitude of these effects were small compared to the much larger changes in entry rates of small firms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints.

Keywords: entrepreneurship, entry size, financial constraints, banking

JEL Classification: E44, G21, L26, L43, M13

Suggested Citation

Kerr, William R. and Nanda, Ramana, Banking Deregulations, Financing Constraints and Firm Entry Size (October 14, 2009). Harvard Business School Entrepreneurial Management Working Paper No. 10-010. Available at SSRN: https://ssrn.com/abstract=1441259 or http://dx.doi.org/10.2139/ssrn.1441259

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ramana Nanda

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/rnanda

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