Small business loan turndowns, personal wealth and discrimination

Ken Cavalluzzo and John Wolken ()

No 2002-35, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using newly available data from the Federal Reserve, we examine the impact of personal wealth on small business loan turndowns across demographic groups. Information on home ownership, home equity, and personal net worth excluding the business owner's home, in combination with data on the personal credit history of the principal owner, the business credit history of the firm, a rich set of additional explanatory variables, and information on the competitiveness of local banking markets, contributes to our understanding of the credit market experiences of small businesses across demographic groups. We find substantial unexplained differences in denial rates between African American-, Hispanic-, Asian-, and white-owned firms. We also find that greater personal wealth is associated with a lower probability of loan denial. However, even after controlling for personal wealth, large differences in denial rates across demographic groups remain. Further, consistent with Becker's classic theories (1957), we find some evidence that African American-denial rates increase with lender market concentration.

Keywords: Small business; Discrimination in mortgage loans (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-ent
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2002/200235/200235abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2002/200235/200235pap.pdf (application/pdf)

Related works:
Journal Article: Small Business Loan Turndowns, Personal Wealth, and Discrimination (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2002-35

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().