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Second–Order Gender Effects: The Case of U.S. Small Business Borrowing Cost

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  • Zhenyu Wu
  • Jess H. Chua

Abstract

Gender–based differential treatment of business borrowers has been illegal for decades now. Therefore, any remaining gender effect is likely to be more subtle than before and second order in nature. Using 1,577 small businesses from the 2003 National Survey of Small Business Finances by the Federal Reserve Board, resolving the gender assignment problem, and isolating the supply effects, our tests detected a second–order gender effect in U.S. small business borrowing cost. Specifically, lenders charge female sole proprietorships an average of 73 basis points higher than male sole proprietorships. The methodology also ameliorates an interpretation problem common to first–order gender effects.

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  • Zhenyu Wu & Jess H. Chua, 2012. "Second–Order Gender Effects: The Case of U.S. Small Business Borrowing Cost," Entrepreneurship Theory and Practice, , vol. 36(3), pages 443-463, May.
    • Handle: RePEc:sae:entthe:v:36:y:2012:i:3:p:443-463
    DOI: 10.1111/j.1540-6520.2012.00503.x
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    4. Geiger, Mark, 2020. "A meta-analysis of the gender gap(s) in venture funding: Funder- and entrepreneur-driven perspectives," Journal of Business Venturing Insights, Elsevier, vol. 13(C).
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    7. Sheela Pandey & Alejandro S. Amezcua, 2020. "Women’s business ownership and women’s entrepreneurship through the lens of U.S. federal policies," Small Business Economics, Springer, vol. 54(4), pages 1123-1152, April.
    8. Kwapisz, Agnieszka, 2020. "Health insurance coverage and sources of advice in entrepreneurship: Gender differences," Journal of Business Venturing Insights, Elsevier, vol. 14(C).
    9. Emma Galli & Danilo V. Mascia & Stefania P. S. Rossi, 2020. "Bank credit constraints for women‐led SMEs: Self‐restraint or lender bias?," European Financial Management, European Financial Management Association, vol. 26(4), pages 1147-1188, September.
    10. Malin Malmström & Jeaneth Johansson & Joakim Wincent, 2017. "Gender Stereotypes and Venture Support Decisions: How Governmental Venture Capitalists Socially Construct Entrepreneurs’ Potential," Entrepreneurship Theory and Practice, , vol. 41(5), pages 833-860, September.
    11. Johan, Sofia A. & Wu, Zhenyu, 2014. "Does the quality of lender–borrower relationships affect small business access to debt? Evidence from Canada and implications in China," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 206-211.
    12. Karen D. Hughes & Jennifer E. Jennings & Candida Brush & Sara Carter & Friederike Welter, 2012. "Extending Women's Entrepreneurship Research in New Directions," Entrepreneurship Theory and Practice, , vol. 36(3), pages 429-442, May.
    13. Irene Comeig & Ainhoa Jaramillo-Gutiérrez & Federico Ramírez, 2022. "Are credit screening contracts designed for men?," Service Business, Springer;Pan-Pacific Business Association, vol. 16(4), pages 883-905, December.
    14. Forrester, Juanita Kimiyo & Neville, François, 2021. "An institutional perspective on borrowing discouragement among female-owned enterprises and the role of regional female empowerment," Journal of Business Venturing, Elsevier, vol. 36(6).
    15. Yang, Shu & Kher, Romi & Newbert, Scott L., 2020. "What signals matter for social startups? It depends: The influence of gender role congruity on social impact accelerator selection decisions," Journal of Business Venturing, Elsevier, vol. 35(2).
    16. Shujun Ding & Zhenyu Wu, 2014. "Family Ownership and Corporate Misconduct in U.S. Small Firms," Journal of Business Ethics, Springer, vol. 123(2), pages 183-195, August.
    17. Song Zhang & Liang Han & Konstantinos Kallias & Antonios Kallias, 2021. "The value of in-person banking: evidence from U.S. small businesses," Review of Quantitative Finance and Accounting, Springer, vol. 57(4), pages 1393-1435, November.
    18. Li, Changhong & Xu, Yuan & Gill, Amarjit & Haider, Zulfiquer Ali & Wang, Yuan, 2019. "Religious beliefs, socially responsible investment, and cost of debt: Evidence from entrepreneurial firms in India," Emerging Markets Review, Elsevier, vol. 38(C), pages 102-114.
    19. Link, Albert N. & Strong, Derek R., 2016. "Gender and Entrepreneurship: An Annotated Bibliography," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 12(4-5), pages 287-441, September.
    20. Evila Piva & Paola Rovelli, 2022. "Mind the gender gap: the impact of university education on the entrepreneurial entry of female and male STEM graduates," Small Business Economics, Springer, vol. 59(1), pages 143-161, June.
    21. Naegels, Vanessa & Mori, Neema & D'Espallier, Bert, 2022. "The process of female borrower discouragement," Emerging Markets Review, Elsevier, vol. 50(C).
    22. Sara Poggesi & Michela Mari & Luisa Vita, 2016. "What’s new in female entrepreneurship research? Answers from the literature," International Entrepreneurship and Management Journal, Springer, vol. 12(3), pages 735-764, September.
    23. Rajeev Goel & Devrim Göktepe-Hultén & Rati Ram, 2015. "Academics’ entrepreneurship propensities and gender differences," The Journal of Technology Transfer, Springer, vol. 40(1), pages 161-177, February.
    24. Jasmine Jaim, 2022. "All About Patriarchal Segregation of Work Regarding Family? Women Business-Owners in Bangladesh," Journal of Business Ethics, Springer, vol. 175(2), pages 231-245, January.

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