The Role of Regulation and Bank Competition in Small Firm Financing: Evidence from the Community Reinvestment Act

Panagiotis Avramidis, George Pennacchi, Konstantinos Serfes () and Kejia Wu

Journal of Money, Credit and Banking, 2022, vol. 54, issue 8, 2301-2340

Abstract: This paper analyzes how regulation that promotes greater access to bank credit, such as the Community Reinvestment Act (CRA), impacts the financing of small firms. It finds that when areas become CRA‐eligible, the likelihood of bank lending to local small firms increases and firms reduce late trade credit payments, consistent with loans allowing small firms to pay trade credit more promptly and avoid late payment fees. The effect is more profound in low‐ and moderate‐income areas where financial constraints are tighter due to low bank competition. The effect is also larger for small firms that operate in trade credit‐dependent industries.

Date: 2022
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https://doi.org/10.1111/jmcb.12938

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Working Paper: The Role of Regulation and Bank Competition in Small Firm Financing: Evidence from the Community Reinvestment Act (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:54:y:2022:i:8:p:2301-2340

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