The Case of Minority Small Business Owners: Empirical Evidence of Problems in Loan Financing

Roman Bohdan, Elizabeth Tipton, Dean Kiefer and Arsen Djatej
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Roman Bohdan: College of Business Administration, The University of New Orleans
Elizabeth Tipton: College of Business and Public Administration, Eastern Washington University
Dean Kiefer: College of Business and Public Administration, Eastern Washington University
Arsen Djatej: College of Business and Public Administration, Eastern Washington University

International Journal of Finance & Banking Studies, 2014, vol. 3, issue 3, 01-13

Abstract: This academic research explores the availability of loan financing to minority-owned businesses and examines a potential relationship between the size of a loan and the characteristics of a business in the USA. It also investigates the possible impact of different characteristics and quantifiable criteria on credit loan denial across different demographic groups. Probit models are used to evaluate the potential existence of racial or ethnic discrimination in the availability and approval of credit. Regressionanalysis is used to assess the impact that the race of a small business owner has on the relativesize of a denied loan, the size of portioned credit, or the size of the company. When other variables suspected of influencing credit approval and rationing arecontrolled, black-owned and Asian-owned businesses appear to be less likely to be approved forloans and more likely to experience significantly greater credit rationing than their white counterparts.

Keywords: Credit; ethnicity; loans; racial discrimination; small businesses (search for similar items in EconPapers)
Date: 2014
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