IDEAS home Printed from https://ideas.repec.org/a/bpj/erjour/v8y2018i4p16n4.html
   My bibliography  Save this article

Size Matters: The Impact of Loan Size on Measures of Disparate Treatment toward Minority Entrepreneurs in the Small Firm Credit Market

Author

Listed:
  • Jackson William E.

    (Management, University of Alabama, Tuscaloosa, AL, USA)

  • Marino Louis

    (Management, University of Alabama, Tuscaloosa, AL, USA)

  • Naidoo Jefrey S.

    (Management, University of Alabama, Tuscaloosa, AL, USA)

  • Tucker Reginald

    (Louisiana State University, Entrepreneurship, Baton Rouge, United States of America)

Abstract

This paper reports the results of investigating differences in measures of disparate treatment, or discrimination, in the small firm credit market that are related to loan size. Because small loans tend to be less profitable to originate than large loans, the competitive nature of the product markets for large and small loans may be quite different. Becker suggests that more competition will reduce the level of discrimination in a market. And some market-based evidence of Becker’s competition effect has been reported in the literature on discrimination in the small firm credit market. We add to this literature by considering the impact of differing levels of competition across products (i.e. small versus large loans). The results for our small loan subsample exhibit strong evidence of disparate treatment, or discrimination, against African-American entrepreneurs. However, the results for the large loan subsample are statistically different. In particular, for the large loan subsample there is no significant evidence of discrimination, or disparate treatment, against African-American entrepreneurs applying for business loans. This strongly suggests that the current evidence of discrimination in the small firm credit market needs to be reconsidered for public policy application purposes.

Suggested Citation

  • Jackson William E. & Marino Louis & Naidoo Jefrey S. & Tucker Reginald, 2018. "Size Matters: The Impact of Loan Size on Measures of Disparate Treatment toward Minority Entrepreneurs in the Small Firm Credit Market," Entrepreneurship Research Journal, De Gruyter, vol. 8(4), pages 1-16, October.
    • Handle: RePEc:bpj:erjour:v:8:y:2018:i:4:p:16:n:4
    DOI: 10.1515/erj-2018-0129
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/erj-2018-0129
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/erj-2018-0129?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, January.
    2. Becker, Gary S, 1993. "Nobel Lecture: The Economic Way of Looking at Behavior," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 385-409, June.
    3. Timothy Bates & William D. Bradford & William E. Jackson, 2018. "Are minority-owned businesses underserved by financial markets? Evidence from the private-equity industry," Small Business Economics, Springer, vol. 50(3), pages 445-461, March.
    4. Cavalluzzo, Ken S & Cavalluzzo, Linda C, 1998. "Market Structure and Discrimination: The Case of Small Businesses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 771-792, November.
    5. Garry D. Bruton & David Ahlstrom & Han–Lin Li, 2010. "Institutional Theory and Entrepreneurship: Where Are We Now and Where Do We Need to Move in the Future?," Entrepreneurship Theory and Practice, , vol. 34(3), pages 421-440, May.
    6. Cole, Rebel A. & Goldberg, Lawrence G. & White, Lawrence J., 2004. "Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(2), pages 227-251, June.
    7. Jonathan Guryan & Kerwin Kofi Charles, 2013. "Taste‐based or Statistical Discrimination: The Economics of Discrimination Returns to its Roots," Economic Journal, Royal Economic Society, vol. 123(11), pages 417-432, November.
    8. Blanchard, Lloyd & Zhao, Bo & Yinger, John, 2008. "Do lenders discriminate against minority and woman entrepreneurs?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 467-497, March.
    9. Timothy Bates & Alicia Robb, 2013. "Greater Access to Capital Is Needed to Unleash the Local Economic Development Potential of Minority-Owned Businesses," Economic Development Quarterly, , vol. 27(3), pages 250-259, August.
    10. Susan Coleman, 2005. "Is There A Liquidity Crisis For Small, Black-Owned Firms?," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 29-47.
    11. Timothy Bates & Alicia Robb, 2016. "Impacts of Owner Race and Geographic Context on Access to Small-Business Financing," Economic Development Quarterly, , vol. 30(2), pages 159-170, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Iryna Demko & Ana Claudia Sant’Anna, 2023. "Impact of Race, Ethnicity, and Gender on the SBA Paycheck Protection Program (PPP) Loan Amounts," Economic Development Quarterly, , vol. 37(3), pages 211-229, August.
    2. Timothy Bates & William D. Bradford & Robert Seamans, 2018. "Minority entrepreneurship in twenty-first century America," Small Business Economics, Springer, vol. 50(3), pages 415-427, March.
    3. Fausto Hernández-Trillo & Ana Laura Martínez-Gutiérrez, 2022. "The Dark Road to Credit Applications: The Small-Business Case of Mexico," Journal of Financial Services Research, Springer;Western Finance Association, vol. 62(1), pages 1-25, October.
    4. Prieger, James, 2023. "Local banking markets and barriers to entrepreneurship in minority and other areas: Does broadband availability help?," MPRA Paper 118102, University Library of Munich, Germany.
    5. T. William Lester & Matthew D. Wilson, 2023. "The Racial and Spatial Impacts of the Paycheck Protection Program," Economic Development Quarterly, , vol. 37(3), pages 243-258, August.
    6. Agier, Isabelle & Szafarz, Ariane, 2013. "Microfinance and Gender: Is There a Glass Ceiling on Loan Size?," World Development, Elsevier, vol. 42(C), pages 165-181.
    7. Mohammed Alyakoob & Mohammad S. Rahman, 2022. "Shared Prosperity (or Lack Thereof) in the Sharing Economy," Information Systems Research, INFORMS, vol. 33(2), pages 638-658, June.
    8. Cole, Rebel & Sokolyk, Tatyana, 2016. "Who needs credit and who gets credit? Evidence from the surveys of small business finances," Journal of Financial Stability, Elsevier, vol. 24(C), pages 40-60.
    9. Kim, Mee Jung & Lee, Kyung Min & Brown, J. David & Earle, John S., 2021. "Black Entrepreneurs, Job Creation, and Financial Constraints," IZA Discussion Papers 14403, Institute of Labor Economics (IZA).
    10. Tan, Eugene & Zeida, Teegawende H., 2024. "Consumer demand and credit supply as barriers to growth for Black-owned startups," Journal of Monetary Economics, Elsevier, vol. 143(C).
    11. Prieger, James E., 2023. "Local banking markets and barriers to entrepreneurship in minority and other areas," Journal of Economics and Business, Elsevier, vol. 124(C).
    12. Timothy Bates & William D. Bradford & William E. Jackson, 2018. "Are minority-owned businesses underserved by financial markets? Evidence from the private-equity industry," Small Business Economics, Springer, vol. 50(3), pages 445-461, March.
    13. Isabelle Agier & Ariane Szafarz, 2011. "Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex," Working Papers CEB 11-005, ULB -- Universite Libre de Bruxelles.
    14. Chowdhury, Shyamal & Ooi, Evarn & Slonim, Robert, 2017. "Racial discrimination and white first name adoption: a field experiment in the Australian labour market," Working Papers 2017-15, University of Sydney, School of Economics.
    15. Grant H. Lewis, 2017. "Effects of federal socioeconomic contracting preferences," Small Business Economics, Springer, vol. 49(4), pages 763-783, December.
    16. Beck, T.H.L. & Behr, P. & Madestam, A., 2011. "Sex and Credit : Is There a Gender Bias in Microfinance?," Other publications TiSEM 65849ab0-04f2-4dc9-9824-3, Tilburg University, School of Economics and Management.
    17. Jye-Shyan Wang & Wen-Jhan Jane & Yu-Hung Cheng & Pei-Hsin Fang, 2021. "Does fan discrimination exist? Mixed-method investigation of customer discrimination in Chinese professional baseball league," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 477-496, September.
    18. Roman Bohdan & Elizabeth Tipton & Dean Kiefer & Arsen Djatej, 2014. "The Case of Minority Small Business Owners: Empirical Evidence of Problems in Loan Financing," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 3(3), pages 01-13, July.
    19. Pham, Tho & Talavera, Oleksandr, 2018. "Discrimination, Social Capital, and Financial Constraints: The Case of Viet Nam," World Development, Elsevier, vol. 102(C), pages 228-242.
    20. Lopez Barrera, E., 2018. "Hispanics immigrants in the fields: is discrimination a barrier to get non-agricultural jobs?," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276016, International Association of Agricultural Economists.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:erjour:v:8:y:2018:i:4:p:16:n:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.