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Banking Deregulations, Financing Constraints, and Firm Entry Size

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  • William R. Kerr
  • Ramana Nanda

Abstract

We examine the effect of U.S. branch banking deregulations on the entry size of new firms, using micro-data from the U.S. Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, among firms that survived at least four years, a greater proportion of firms entered either at their maximum size or closer to the maximum size in the first year. The magnitude of these effects were small compared to the much larger changes in entry rates of small firms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints. (JEL: E44, G21, L26, L43, M13) (c) 2010 by the European Economic Association.

Suggested Citation

  • William R. Kerr & Ramana Nanda, 2010. "Banking Deregulations, Financing Constraints, and Firm Entry Size," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 582-593, 04-05.
    • Handle: RePEc:tpr:jeurec:v:8:y:2010:i:2-3:p:582-593
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    References listed on IDEAS

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    1. Jith Jayaratne & Philip E. Strahan, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 639-670.
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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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