Does Securitization Support Entrepreneurial Activity?
47 Pages Posted: 28 Aug 2012 Last revised: 30 Jan 2013
Date Written: January 2013
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: Suggested Citation