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Credit Unions, Consolidation and Small Business Lending: Evidence from Canada

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  • Morgan, Horatio M.
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    Abstract

    This study examines how consolidation activity in the credit union system may impact small business lending. Drawing on Canadian provincial-level data over the period 1992-2009, it provides systematic evidence which suggests that the size of credit unions has a statistically significant negative effect on the rate of new business formation. While the magnitude of this negative effect was found to be very small when the degree of competition was low, it grew as competition intensified in the credit union system. Meanwhile, the size of the federally chartered banking sector was found to have a statistically significant, but economically insignificant negative effect on the rate of new business formation. This result was not affected by consolidation activity in the credit union system. These findings suggest that it is the intensification of competition that most acutely undermines small business lending, and by extension, new business formation in a concentrated credit union system.

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    File URL: http://mpra.ub.uni-muenchen.de/50813/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50813.

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    Date of creation: 18 Oct 2013
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    Handle: RePEc:pra:mprapa:50813

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    Keywords: Competition; Consolidation; Credit unions; New business formation; Relationship lending; Small business lending;

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