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

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Author Info

  • Timothy Bates
  • Caren Grown

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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File URL: ftp://ftp2.census.gov/ces/wp/1991/CES-WP-91-09.pdf
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Bibliographic Info

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
Date of revision:
Handle: RePEc:cen:wpaper:91-9

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Keywords: CES; economic; research; micro; data; microdata; chief; economist;

References

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  1. Timothy Bates & Robert McGuckin, 1990. "The Characteristics of Business Owners Data Base," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 736-751.
  2. Alfred R Nucci & Timothy Bates, 1990. "An Analysis of Small Business Size and Rate of Discontinuance," Working Papers, Center for Economic Studies, U.S. Census Bureau 90-2, Center for Economic Studies, U.S. Census Bureau.
  3. 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.
  4. Bates, Timothy, 2011. "Minority Entrepreneurship," Foundations and Trends(R) in Entrepreneurship, now publishers, now publishers, vol. 7(3–4), pages 151-311, October.
  5. Timothy Bates, 1985. "Impact of preferential procurement policies on minority-owned businesses," The Review of Black Political Economy, Springer, Springer, vol. 14(1), pages 51-65, June.
  6. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
  7. Holmes, T.J. & Schmitz, J.A., 1988. "A Theory Of Enterpreneurship And Its Application To The Study Of Business Transfers," Working papers, Wisconsin Madison - Social Systems 8827, Wisconsin Madison - Social Systems.
  8. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
  9. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 808-27, August.
  10. 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.
  11. Timothy Bates, 1988. "Do black-owned businesses employ minority workers? new evidence," The Review of Black Political Economy, Springer, Springer, vol. 16(4), pages 51-64, March.
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Citations

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Cited by:
  1. Harry Holzer & David Neumark, 1999. "Assessing Affirmative Action," NBER Working Papers 7323, National Bureau of Economic Research, Inc.
  2. Timothy Bates & Darrell Williams, 1995. "Preferential Procurement Programs Do Not Necessarily Help Minority-Owned Business," Working Papers, Center for Economic Studies, U.S. Census Bureau 95-1, Center for Economic Studies, U.S. Census Bureau.
  3. Price, Gregory N., 1995. "The determinants of entry for black-owned commercial banks," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 35(3), pages 289-303.
  4. Thomas Astebro & Irwin Bernhardt, 1999. "The Winners Curse of Human Capital," Working Papers, Center for Economic Studies, U.S. Census Bureau 99-5, Center for Economic Studies, U.S. Census Bureau.
  5. Alfred R Nucci, 1992. "The Characteristics of Business Owners Database," Working Papers, Center for Economic Studies, U.S. Census Bureau 92-7, Center for Economic Studies, U.S. Census Bureau.
  6. Thomas Åstbro & Irwin Bernhardt, 2005. "The Winner’s Curse of Human Capital," Small Business Economics, Springer, Springer, vol. 24(1), pages 63-78, February.
  7. Brian Headd, 1999. "The Characteristics of Business Owners Database, 1992," Working Papers, Center for Economic Studies, U.S. Census Bureau 99-8, Center for Economic Studies, U.S. Census Bureau.

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