Testing for racial bias in business credit scores

Alicia Robb () and David Robinson
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Alicia Robb: University of Colorado at Boulder and University of California, Berkeley

Small Business Economics, 2018, vol. 50, issue 3, No 2, 429-443

Abstract: Abstract We develop a novel empirical test of racial bias based on comparisons between forward-looking, expectations-based credit scores and backward-looking, repayment-history-based credit scores. We then test for racial bias using confidential-access data from the Kauffman Firm Survey. Businesses founded by disadvantaged minorities have much lower average business credit scores, but these scores show no evidence of racial bias. If anything, forward-looking credit-score models under-predict the rate of payment delinquency among minority-owned businesses.

Keywords: Business credit scores; Banking·minority entrepreneurship (search for similar items in EconPapers)
JEL-codes: G21 J15 L26 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s11187-017-9878-2

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