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Competition, Small Business Financing, and Discrimination: Evidence from a New Survey

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  • Ken S. Cavalluzzo

    (Georgetown University)

Abstract

We analyze credit applications, loan denials, and interest rates paid by small businesses across owner gender, race, and ethnicity. In addition, we examine data from owners who said they did not apply for credit because they believed that their applications would have been turned down. After controlling for a rich set of explanatory variables, including personal and business credit histories, substantial differences in denial rates between firms owned by African Americans and white males remain. Moreover, consistent with Becker's classic theories (1957), we find evidence that increases in competition in the firm's local banking market reduces these differences.

Suggested Citation

  • Ken S. Cavalluzzo, 2002. "Competition, Small Business Financing, and Discrimination: Evidence from a New Survey," The Journal of Business, University of Chicago Press, vol. 75(4), pages 641-680, October.
    • Handle: RePEc:ucp:jnlbus:v:75:y:2002:i:4:p:641-680
    DOI: 10.1086/341638
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