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Banking Deregulations, Financing Constraints and Firm Entry Size

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Author Info
William R. Kerr () (Harvard Business School, Entrepreneurial Management Unit)
Ramana Nanda () (Harvard Business School, Entrepreneurial Management Unit)

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Abstract

We examine the effect of US branch banking deregulations on the entry size of new firms using micro-data from the US Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, among firms that survived at least four years, a greater proportion of firms entered either at their maximum size or closer to the maximum size in the first year. The magnitude of these effects were small compared to the much larger changes in entry rates of small firms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints.

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File URL: http://www.hbs.edu/research/pdf/10-010.pdf
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File Function: Revised version - 2009
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Publisher Info
Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 10-010.

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Length: 13 pages
Date of creation: Aug 2009
Date of revision: Oct 2009
Handle: RePEc:hbs:wpaper:10-010

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Related research
Keywords: entrepreneurship; entry size; financial constraints; banking.;

Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups

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This page was last updated on 2009-11-19.

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