Financial Constraints of Ethnic Entrepreneurship: Evidence from Germany

Jana Bruder, Doris Neuberger () and Solvig Raethke-Doeppner

No 84, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics, Germany

Abstract: This is the first attempt to test hypotheses about financial constraints of ethnic minority owned businesses in Germany. Using data from a survey among 3,000 ethnic and native entrepreneurs, we examine differences in the financing patterns between both demographic groups. We find that entrepreneurs with a migration background are more likely to be denied credit or to obtain smaller loan amounts than requested. After controlling for observed risk factors and financial relationships as explanatory variables, ethnicity plays no role in explaining differences in the probability of credit rationing. These can be rather explained by the firm's location and characteristics of the bank-customer relationship. Thus, we find no evidence for prejudicial discrimination in the loan market.

JEL-codes: G21 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-ent and nep-mig
Date: Written
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