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

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Geraldo Cerqueiro

Catolica-Lisbon SBE

María Fabiana Penas

Universidad Torcuato Di Tella

Date Written: August 15, 2014

Abstract

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

Berger, Allen N. and Cerqueiro, Geraldo and Penas, María Fabiana, Market Size Structure and Small Business Lending: Are Crisis Times Different from Normal Times? (August 15, 2014). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2261932 or http://dx.doi.org/10.2139/ssrn.2261932

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Geraldo Cerqueiro

Catolica-Lisbon SBE ( email )

Palma de Cima
Lisbon, 1649-023
Portugal

María Fabiana Penas

Universidad Torcuato Di Tella ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

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