Banking Market Concentration and Credit Availability to Small Businesses
32 Pages Posted: 6 Apr 2008
Abstract
This paper examines how banking market concentration affects small businesses finance. Using the Survey of Small Business Finance, the empirical model show that bank concentration may adversely affect the amount of credit supplied to small businesses. We find that bank concentration decreases the L/C limits of firms significantly, while there is no statistically significant difference in L/C balance across banking markets. We also show that bank concentration lowers the overall debt-to-asset ratio of small firms that includes loans from nonbank institutions, suggesting that credit from non-bank institutions do not fully make up the effect of bank concentration.
Keywords: Bank Competition, Indebtedness, Small Business, Relationship
JEL Classification: G21
Suggested Citation: Suggested Citation
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