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Consolidation, technology, and the changing structure of banks' small business lending

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Author Info
David P. Ely
Kenneth J. Robinson
Abstract

The U.S. banking industry continues to consolidate, with large, complex banking organizations becoming more important. Traditionally, these institutions have not emphasized small business lending. On the other hand, technological advances, particularly credit scoring models, make it easier for banks to extend small business credit. To see what effects these influences might have generated on small business lending, David Ely and Kenneth Robinson explore the small business lending patterns at U.S. banks from 1994 through 1999. They find that larger banks are increasing their market share, most noticeably in the smallest segment of the small business loan market. The authors also present evidence that the size of the average small business loan has declined, especially at larger organizations, and that the gap in lending focus on the smallest small business loans has narrowed between small and large banks. These trends are consistent with increasing use of credit scoring models.

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Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

Volume (Year): (2001)
Issue (Month): Q I ()
Pages: 23-32
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Handle: RePEc:fip:fedder:y:2001:i:qi:p:23-32

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Related research
Keywords: Credit ; Credit scoring systems;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Cole, Rebel A., 1998. "The importance of relationships to the availability of credit," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 959-977, August. [Downloadable!] (restricted)
  2. DeYoung, Robert & Goldberg, Lawrence G. & White, Lawrence J., 1999. "Youth, adolescence, and maturity of banks: Credit availability to small business in an era of banking consolidation," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 463-492, February. [Downloadable!] (restricted)
  3. Jayaratne, Jith & Wolken, John, 1999. "How important are small banks to small business lending?: New evidence from a survey of small firms," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 427-458, February. [Downloadable!] (restricted)
  4. Loretta J. Mester, 1997. "What's the point of credit scoring?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-16. [Downloadable!]
  5. Mark E. Levonian, 1997. "Changes in small business lending in the West," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Jan 24. [Downloadable!]
  6. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July. [Downloadable!] (restricted)
  7. Rebecca S. Demsetz, 1999. "Bank loan sales: a new look at the motivations for secondary market activity," Staff Reports 69, Federal Reserve Bank of New York. [Downloadable!]
  8. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January. [Downloadable!] (restricted)
  9. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, 04. [Downloadable!] (restricted)
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  10. Peek, Joe & Rosengren, Eric S., 1998. "Bank consolidation and small business lending: It's not just bank size that matters," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 799-819, August. [Downloadable!] (restricted)
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  11. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March. [Downloadable!] (restricted)
  12. Karen Couch & Donna L. Parker, 2000. "'Net interest' grows as banks rush online," The Southwest Economy, Federal Reserve Bank of Dallas, issue Mar, pages 1-5. [Downloadable!]
  13. Goldberg, Lawrence G. & White, Lawrence J., 1998. "De novo banks and lending to small businesses: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 851-867, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yonjil Jeon & Stephen M. Miller, 2005. "Bank Performance: Market Power or Efficient Structure?," Working papers 2005-23, University of Connecticut, Department of Economics. [Downloadable!]
  2. Yongil Jeon & Stephen M. Miller, 2002. "Bank Concentration and Performance," Working papers 2002-25, University of Connecticut, Department of Economics. [Downloadable!]
  3. Yongil Jeon & Stephen M. Miller, 2002. "Has Deregulation Affected Births, Deaths, and Marriages in the U.S. Commercial Banking Industry?," Working papers 2002-26, University of Connecticut, Department of Economics. [Downloadable!]
    Other versions:
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