Review of Finance Vol. 19 No. 5 2015

Market Size Structure and Small Business Lending: Are Crisis Times Different from Normal Times?

Allen N. Berger¹; Geraldo Cerqueiro²; María Fabiana Penas³

¹ 1 University of South Carolina, Wharton Financial Institutions Center, and European Banking Center, · ² 2 Catolica Lisbon School of Business and Economics, and · ³ 3 Tilburg University, European Banking Center, and Tilburg Law and Economics Center

Abstract

Conventional wisdom holds that small banks have comparative advantages vis-à-vis large banks in serving small firms, while recent literature suggests this may not be the case. Using a panel of recent US start-ups, we investigate how small bank presence affects these firms in normal times (2004–06) and in the recent financial crisis (2007–09). We find that greater small bank presence yields significantly more lending to and slightly lower failure rates of these firms during normal times. However, these benefits disappear during the financial crisis, possibly because small banks are less diversified and benefit less from government guarantees than large banks.

DOI

10.1093/rof/rfu042

Volume

19

Issue

5

Pages

1965-1995

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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