The great recession and bank lending to small businesses

Arbeitspapier

This paper investigates whether small firms have experienced worse tightening of credit conditions during the Great Recession than large firms. To structure the empirical analysis, the paper first develops a simple model of bank loan pricing that derives both the interest rates on loans actually made and the marginal condition for loans that would be rationed in the event of an economic downturn. Empirical estimations using loan-level data find evidence that, once we account for the contractual features of business loans made under formal commitments to lend, interest rate spreads on small loans have declined on average relative to spreads on large loans during the Great Recession. Quantile regressions further reveal that the relative decline in average spread is entirely accounted for by loans to the riskier borrowers. These findings are consistent with the pattern of differentially more rationing of credit to small borrowers in recessions as predicted by the model. This suggests that policy measures that counter this effect by encouraging lending to small businesses may be effective in stimulating their recovery and, in turn, job growth.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Papers ; No. 11-16

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Crises ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Money Supply; Credit; Money Multipliers

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Montoriol-Garriga, Judit ; Wang, J. Christina
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Boston
• (wo): Boston, MA
• (wann): 2011

Weitere Informationen

• Handle: http://hdl.handle.net/10419/55663
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ