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Does credit expansion encourage small businesses to incorporate? Evidence from US bank deregulations

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  • Ma, Jiantao
  • Sarker, Anindo
  • Unel, Bulent

Abstract

We use state-level bank deregulations to study the impact of changes in credit on incorporation among unincorporated self-employed business owners. Exploiting the variation in the staggered timing of banking deregulations and using the recent advances in difference-in-differences (DiD) estimation techniques, we find that banking reforms considerably increased unincorporated businesses to incorporate. Further, the effects of reforms are different across groups based on gender, race, education, and age. We find stronger effects on incorporated business creation among female, less-educated, and younger unincorporated business owners. Our results are robust to the choice of controls, samples, and estimation approaches.

Suggested Citation

  • Ma, Jiantao & Sarker, Anindo & Unel, Bulent, 2025. "Does credit expansion encourage small businesses to incorporate? Evidence from US bank deregulations," Journal of Economic Behavior & Organization, Elsevier, vol. 230(C).
    • Handle: RePEc:eee:jeborg:v:230:y:2025:i:c:s0167268124004943
    DOI: 10.1016/j.jebo.2024.106880
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    More about this item

    Keywords

    Interstate bank deregulation; Intrastate bank deregulation; Credit constraints; Incorporation; Incorporated self-employment; Unincorporated self-employment;
    All these keywords.

    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; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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