Market Size Structure and Small Business Lending: Are Crisis Times Different from Normal Times?
Review of Finance, Forthcoming
39 Pages Posted: 8 May 2013 Last revised: 22 Sep 2014
Date Written: August 15, 2014
Conventional wisdom holds that small banks have comparative advantages vis-à-vis large banks in serving small firms, while recent literature suggests this may not be the case. Using a panel of recent US start-ups, we investigate how small bank presence affects these firms in normal times (2004-2006) and in the recent financial crisis (2007-2009). We find that greater small bank presence yields significantly more lending to and slightly lower failure rates of these firms during normal times. However, these benefits disappear during the financial crisis, possibly because small banks are less diversified and benefit less from government guarantees than large banks.
Keywords: Banks, Bank size, Small business, Start-ups, Financial crisis
JEL Classification: G21, G28, L11
Suggested Citation: Suggested Citation