Competition, small business financing, and discrimination: evidence from a new survey
Using data from the 1993 National Survey of Small Business Finances, we examine some of the factors influencing differences in small business credit market experiences across demographic groups. We analyze credit applications, loan denials, and interest rates paid across gender, race and ethnicity of small business owners. In addition, we analyze data gathered from small business owners who said they did not apply for credit because they believed that their application would have been turned down. This set of analyses, in combination with important new information on the personal credit history of the principal owner, the business credit history of the firm, a rich set of additional explanatory variables, and information on local bank market structure, helps us to understand better the sources of observed differentials in the credit market experiences of small business operators across demographic groups. Credit market experiences often differ markedly among demographic groups. However, so do the characteristics of firms and owners. Results of our multivariate analyses show that many of the factors we consider help to explain the observed differences in credit market experiences However, even after controlling for a large number of firm and owner characteristics, substantial differences often remained. There was also evidence that some of the differentials were associated with the degree of lender market concentration in the firm's local area.
|Date of creation:||1999|
|Contact details of provider:|| Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551|
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
- Evans, David S., 1986.
"Tests of Alternative Theories of Firm Growth,"
86-36, C.V. Starr Center for Applied Economics, New York University.
- Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
- Sharon M. Oster, 1975. "Industry Differences in the Level of Discrimination Against Women," The Quarterly Journal of Economics, Oxford University Press, vol. 89(2), pages 215-229.
- Hunter, William C & Walker, Mary Beth, 1996.
"The Cultural Affinity Hypothesis and Mortgage Lending Decisions,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 13(1), pages 57-70, July.
- William C. Hunter & Mary Beth Walker, 1995. "The cultural affinity hypothesis and mortgage lending decisions," Working Paper Series, Issues in Financial Regulation 95-8, Federal Reserve Bank of Chicago.
- Riley, John G, 1987. "Credit Rationing: A Further Remark [Credit Rationing in Markets with Imperfect Information] [Incentives Effects of Terminations: Applications to the Credit and Labor Markets]," American Economic Review, American Economic Association, vol. 77(1), pages 224-227, March.
- Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
- David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003.
"Discrimination in the Small-Business Credit Market,"
The Review of Economics and Statistics,
MIT Press, vol. 85(4), pages 930-943, November.
- David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 1998. "Discrimination in the Small Business Credit Market," NBER Working Papers 6840, National Bureau of Economic Research, Inc.
- Cole, Rebel, 1999. "Availability of credit to small and minority-owned businesses: Evidence from the 1993 National Survey of Small Business Finances," MPRA Paper 4715, University Library of Munich, Germany.
- Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996.
"Mortgage Lending in Boston: Interpreting HMDA Data,"
American Economic Review,
American Economic Association, vol. 86(1), pages 25-53, March.
- Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston.
- Duca John V. & Rosenthal Stuart S., 1993.
"Borrowing Constraints, Household Debt, and Racial Discrimination in Loan Markets,"
Journal of Financial Intermediation,
Elsevier, vol. 3(1), pages 77-103, October.
- Duca, John V. & Rosenthal, Stuart S., 1993. "Borrowing constraints, household debt, and racial discrimination in loan markets," Working Papers 9312, Federal Reserve Bank of Dallas.
- Berkovec, James A & Canner, Glenn B. & Gabriel, Stuart A. & Hannan, Timothy H., 1994.
"Race, Redlining, and Residential Mortgage Loan Performance,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 9(3), pages 263-294, November.
- James A. Berkovec & Glenn B. Canner & Stuart A. Gabriel & Timothy H. Hannan, 1994. "Race, redlining, and residential mortgage loan performance," Proceedings, Federal Reserve Bank of Philadelphia, pages 263-298.
- Matthew S. Goldberg, 1982. "Discrimination, Nepotism, and Long-Run Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 307-319.
- Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-381, July.
- Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
- Welch, Finis, 1973. "Black-White Differences in Returns to Schooling," American Economic Review, American Economic Association, vol. 63(5), pages 893-907, December.
- Myron L. Kwast & Martha Starr-McCluer & John D. Wolken, 1997. "Market definition and the analysis of antitrust in banking," Finance and Economics Discussion Series 1997-52, Board of Governors of the Federal Reserve System (U.S.).
- Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
- Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Comanor, William S, 1973. "Racial Discrimination in American Industry," Economica, London School of Economics and Political Science, vol. 40(160), pages 363-378, November.
- Gregory E. Elliehausen & John D. Wolken, 1990.
"Banking markets and the use of financial services by small and medium- sized businesses,"
160, Board of Governors of the Federal Reserve System (U.S.).
- Gregory E. Elliehausen & John D. Wolken, 1990. "Banking markets and the use of financial services by small and medium- sized businesses," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 801-817.
- Cavalluzzo, Ken S & Cavalluzzo, Linda C, 1998. "Market Structure and Discrimination: The Case of Small Businesses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 771-792, November.
- Shepherd, William G & Levin, Sharon G, 1973. "Managerial Discrimination in Large Firms," The Review of Economics and Statistics, MIT Press, vol. 55(4), pages 412-422, November.
- Black, Harold & Schweitzer, Robert L & Mandell, Lewis, 1978. "Discrimination in Mortgage Lending," American Economic Review, American Economic Association, vol. 68(2), pages 186-191, May.
- David Neumark, 1988.
"Employers' Discriminatory Behavior and the Estimation of Wage Discrimination,"
Journal of Human Resources,
University of Wisconsin Press, vol. 23(3), pages 279-295.
- David Neumark, 1987. "Employers' discriminatory behavior and the estimation of wage discrimination," Special Studies Papers 227, Board of Governors of the Federal Reserve System (U.S.).
- Walter Haessel & John Palmer, 1978. "Market Power and Employment Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 13(4), pages 545-560.
- Donald J. Cymrot, 1985. "Does Competition Lessen Discrimination? Some Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 605-612.
- Richard L. Peterson, 1981. "An Investigation of Sex Discrimination in Commercial Banks' Direct Consumer Lending," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 547-561, Autumn.
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
- Ferguson, Michael F & Peters, Stephen R, 1995. " What Constitutes Evidence of Discrimination in Lending?," Journal of Finance, American Finance Association, vol. 50(2), pages 739-748, June.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:1999-25. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Franz Osorio)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.