Does Securitization Support Entrepreneurial Activity?

47 Pages Posted: 28 Aug 2012 Last revised: 30 Jan 2013

See all articles by Babu G. Baradwaj

Babu G. Baradwaj

Towson University - Department of Finance

Michaël Dewally

Towson University - Department of Finance

Yingying Shao

Towson University - Department of Finance

Date Written: January 2013

Abstract

This paper investigates the impact of financial innovations, in particular loan securitization on entrepreneurial activity in the U.S. We suggest a credit supply channel through which banks’ loan securitization can contribute to the development of entrepreneurship. We provide supportive evidence that securitization alters both small and large banks’ small business lending strategy and that banks’ overall credit supply to small businesses increases with the degree of securitization. Moreover, the results show that active use of securitization by banks benefits entrepreneurship in increasing new business creation in the U.S. We also find that bank securitization has a positive impact on entrepreneurship activity during both economic downturn and normal times.

Keywords: Banks, Securitization, Entrepreneurship, Firm creation

JEL Classification: G21, L26, O16, M13

Suggested Citation

Baradwaj, Babu G. and Dewally, Michaël and Shao, Yingying, Does Securitization Support Entrepreneurial Activity? (January 2013). Midwest Finance Association 2013 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2137256 or http://dx.doi.org/10.2139/ssrn.2137256

Babu G. Baradwaj

Towson University - Department of Finance ( email )

United States

Michaël Dewally (Contact Author)

Towson University - Department of Finance ( email )

8000 York Road
Suite 316 L
Baltimore, MD 21252-0001
United States
410-704-4902 (Phone)

Yingying Shao

Towson University - Department of Finance ( email )

United States

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