Changes in the Banking System and Small Business Lending

Kazuki Onji, David Vera

    Research output: Contribution to journalArticle

    Abstract

    Since small businesses typically rely on small banks as their primary source of financing, there are concerns that the wave of bank consolidation of the 1990s may have reduced the availability of loans to small businesses in the US. Using a panel of state-level banking information over 1993-2002, this paper shows that the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 reduced the number of small banks, but not the amount of small business lending. We also show that small banks are participating less in small business lending. These results imply that the bank-lending channel of the monetary transmission mechanism became less important in the US in the late 1990s as a result of more firms borrowing from large banks that are less sensitive to monetary shocks.
    Original languageEnglish
    Pages (from-to)293-308
    JournalSmall Business Economics
    Volume34
    Issue number3
    DOIs
    Publication statusPublished - 2008

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