Large banks and small firm lending

Vitaly M. Bord, Victoria Ivashina and Ryan D. Taliaferro

Journal of Financial Intermediation, 2021, vol. 48, issue C

Abstract: We examine the long-lasting effects of the 2007 real estate price collapse on small business credit supply. Banks affected by the decline in real estate prices systematically contracted their credit to small firms. At the same time, regional and local banks, many of which were unaffected by the initial shock, increased small business lending to nearby borrowers and opportunistically expanded their branch networks, making gains in market share that persisted for the following decade. Although the net effect of the contraction in credit was negative, we show that opportunistic expansion tied to permanent market changes is an important offsetting force that dampened the negative effect on small firms during the GFC and its aftermath.

Keywords: Small firms; Credit supply; Banking competition (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:48:y:2021:i:c:s1042957321000255

DOI: 10.1016/j.jfi.2021.100924

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