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De Novo Banks and Lending to Small Businesses: An Empirical Analysis

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  • Lawrence G. Goldberg
  • Lawrence J. White

Abstract

Recent widespread consolidation in the banking industry has elicited concern that lending to small businesses will be reduced by the banking industry. The consolidation, though, has stimulated an upsurge in new bank charters. This study compares the lending by de novo banks to small businesses with the lending by similarly sized incumbent banks for years 1987-1994. We find that the portfolios of de novo banks consistently contain a substantially higher percentage of small business loans than do the portfolios of similar incumbents. These results indicate that de novo banks can be part of the solution to the problems that consolidation may create.

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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business- in its series New York University, Leonard N. Stern School Finance Department Working Paper Seires with number 98-039.

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Date of creation: 28 Jul 1997
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Handle: RePEc:fth:nystfi:98-039

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Postal: U.S.A.; New York University, Leonard N. Stern School of Business, Department of Economics . 44 West 4th Street. New York, New York 10012-1126
Phone: (212) 998-0100
Web page: http://w4.stern.nyu.edu/finance/
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References

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  1. Mark E. Levonian, 1996. "Explaining differences in farm lending among banks," Economic Review, Federal Reserve Bank of San Francisco, pages 12-22.
  2. Allen N. Berger & Anthony Saunders & Joseph M. Scalise & Gregory F. Udell, 1997. "The effects of bank mergers and acquisitions on small business lending," Proceedings 549, Federal Reserve Bank of Chicago.
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  17. Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
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  19. Leonard I. Nakamura, 1994. "Small borrowers and the survival of the small bank: is mouse bank Mighty or Mickey?," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
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