Economics at your fingertips  

Stress Tests, Entrepreneurship, and Innovation*

Sebastian Doerr

Review of Finance, 2021, vol. 25, issue 5, 1609-1637

Abstract: This article shows that postcrisis stress tests have negative effects on entrepreneurship and innovation at young firms. Exploiting unique data on business-related home equity loans in Home Mortgage Disclosure Act, I show that stress-tested banks strongly cut small business loans secured by home equity, an important source of financing for entrepreneurs. Lower credit supply leads to a relative decline in entrepreneurship in counties with higher exposure to stress-tested banks. The decline is stronger in sectors with a higher share of young firms using home equity financing, that is, in which the reduction in credit hits hardest. More-exposed counties also see a decline in young firms’ patent applications as well as labor productivity, reflecting young firms’ disproportionate contribution to growth.

Keywords: Stress tests; Small business lending; Home equity; Entrepreneurship; Innovation (search for similar items in EconPapers)
JEL-codes: G20 G21 L26 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Review of Finance is currently edited by Amit Goyal, Marcin Kacperczyk, Daniel Paravisini, Christine Parlour, Chris Parsons, Joel Peress and Geoffrey Tate

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press () and Christopher F. Baum ().

Page updated 2022-01-07
Handle: RePEc:oup:revfin:v:25:y:2021:i:5:p:1609-1637.