Don’t Lions Help Lambs? Small Bank Supply and Small Business Activity
48 Pages Posted: 6 Sep 2010
Date Written: June 15, 2009
I study whether the supply of small banks in a local area impacts small business activity. By using a natural experiment together with a triple differences estimation based on a propensity score matched sample, I am able to identify the exogenous effect of small banks’ market presence. Although small banks may have a comparative advantage in relationship banking, I find that their market share in the local area does not have a significant impact on small business activity. My results imply that relationship banking is not crucial for average small businesses and that large banks’ entrance to the local banking industry does not necessarily threat local small businesses’ development.
JEL Classification: G21
Suggested Citation: Suggested Citation