HOW DID THE FINANCIAL CRISIS AFFECT SMALL‐BUSINESS LENDING IN THE UNITED STATES?

Rebel Cole and Jason Damm

Journal of Financial Research, 2020, vol. 43, issue 4, 767-820

Abstract: We analyze changes in lending by U.S. banks to businesses from 1994 to 2011. We find that lending to businesses, and in particular to small businesses, declined precipitously following onset of the financial crisis. We also examine the relative changes in business lending by banks that did, and did not, receive Troubled Asset Relief Program (TARP) funds from the U.S. Treasury, and find that banks receiving capital injections from the TARP failed to increase their small‐business lending. Finally, we find strong and significant positive relations of both bank capital adequacy and profitability with small‐business lending.

Date: 2020
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https://doi.org/10.1111/jfir.12225

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