Commercial Bank Lending Practices And The Development Of Black-Owned Construction Companies

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Commercial Bank Lending Practices And The Development Of Black-Owned Construction Companies

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Timothy Bates
Caren Grown

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Abstract

Although the construction industry has been a tremendous growth industry for black entrepreneurs in recent years, black-owned construction firms, on average, are less than half the size of those owned by nonminorities. Previous findings suggest that limited access to financial capital, particularly bank loans, has restricted the size of black-owned businesses. Examination of nationwide random samples of construction companies reveals that black firms are treated differently than nonminorities when they borrow from commercial banks: they get smaller loans than nonminorities who have otherwise identical traits. Undercapitalization, in turn, is shown to increase the likelihood of firm discontinuance. Alleviation of undercapitalization problems would help promote the development of black-owned businesses in the construction industry.

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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 91-9.

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Date of creation: Dec 1991
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Handle: RePEc:cen:wpaper:91-9

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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.:

Alfred R Nucci & Timothy Bates, 1990. "An Analysis of Small Business Size and Rate of Discontinuance," Working Papers 90-2, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
Timothy Bates, 1988. "Do black-owned businesses employ minority workers? new evidence," The Review of Black Political Economy, Springer, vol. 16(4), pages 51-64, March. [Downloadable!] (restricted)
Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November. [Downloadable!] (restricted)
Bates, Timothy, 1973. "An Econometric Analysis of Lending to Black Businessmen," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 272-83, August. [Downloadable!] (restricted)
Timothy Bates, 1985. "Impact of preferential procurement policies on minority-owned businesses," The Review of Black Political Economy, Springer, vol. 14(1), pages 51-65, June. [Downloadable!] (restricted)
Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-94, April. [Downloadable!] (restricted)
Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, 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.)

Timothy Bates & Darrell Williams, 1995. "Preferential Procurement Programs Do Not Necessarily Help Minority-Owned Business," Working Papers 95-1, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
Brian Headd, 1999. "The Characteristics of Business Owners Database, 1992," Working Papers 99-8, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
Thomas Åstbro & Irwin Bernhardt, 2005. "The Winner’s Curse of Human Capital," Small Business Economics, Springer, vol. 24(1), pages 63-78, February. [Downloadable!] (restricted)
Thomas Astebro & Irwin Bernhardt, 1999. "The Winners Curse of Human Capital," Working Papers 99-5, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
Alfred R Nucci, 1992. "The Characteristics of Business Owners Database," Working Papers 92-7, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]

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