Banking Market Concentration and Credit Availability to Small Businesses

32 Pages Posted: 6 Apr 2008

See all articles by Yongjin Park

Yongjin Park

Connecticut College - Department of Economics

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

Park, Yongjin, Banking Market Concentration and Credit Availability to Small Businesses. Available at SSRN: https://ssrn.com/abstract=1116744 or http://dx.doi.org/10.2139/ssrn.1116744

Yongjin Park (Contact Author)

Connecticut College - Department of Economics ( email )

New London, CT 06320
United States
(860) 439-2514 (Phone)

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