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Credit Rationing And Black-Owned Firms: Is There Evidence Of Discrimination?

Author

Listed:
  • YONGJIN PARK

    (Connecticut College, New London, CT 06320, USA)

  • SUSAN COLEMAN

    (University of Hartford, West Hartford, CT 06117, USA)

Abstract

This article uses data from the 2003 Survey of Small Business Finances to determine if banks ration credit more severely to black-owned firms. Our results reveal this is the case. Using the Heckman two-step procedure, we determined that black- and white-owned firms have a comparable demand for credit as measured by their actual use of lines of credit. Controlling for firm and owner characteristics, however, black-owned firms had lower line of credit limits suggesting constraints in supply. Further, our findings suggest the supply of credit to black-owned firms is even more severely constrained than other minority-owned firms. These findings highlight the possibility of discrimination against black-owned firms in the form of credit rationing.

Suggested Citation

  • Yongjin Park & Susan Coleman, 2009. "Credit Rationing And Black-Owned Firms: Is There Evidence Of Discrimination?," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 14(03), pages 255-271.
    • Handle: RePEc:wsi:jdexxx:v:14:y:2009:i:03:n:s1084946709001302
    DOI: 10.1142/S1084946709001302
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    Citations

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    Cited by:

    1. 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.
    2. Annie bellier & Wafa Sayeh & Stéphanie Serve, 2012. "What lies behind credit rationing? A survey of the literature," THEMA Working Papers 2012-39, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    3. Grace Kim, 2011. "Minority Small-Firm Credit Applicants: Does Persistence Pay?," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 15(2), pages 91-106, Winter.

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