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  • October 2009
  • Article
  • Journal of Financial Economics

Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship

By: William R. Kerr and Ramana Nanda
  • Format:Print
  • | Pages:26
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Abstract

We examine entrepreneurship and creative destruction following US banking deregulations using Census Bureau data. US banking reforms brought about exceptional growth in both entrepreneurship and business closures. Most of the closures, however, were the new ventures themselves. Although we do find evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants. We argue that creative destruction requires many business failures along with the few great successes. The successes are very difficult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets.

Keywords

Entrepreneurship; Governing Rules, Regulations, and Reforms; Market Entry and Exit; Capital Markets; Banks and Banking; Growth and Development; Disruptive Innovation

Citation

Kerr, William R., and Ramana Nanda. "Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship." Journal of Financial Economics 94, no. 1 (October 2009): 124–149.
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About The Authors

William R. Kerr

Entrepreneurial Management
→More Publications

Ramana Nanda

Entrepreneurial Management
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More from the Authors
  • ELCA's Series A By: Anke Becker, Ray Kluender and William R. Kerr
  • Social Networks, Ethnicity, and Entrepreneurship By: William R. Kerr and Martin Mandorff
  • Note on Cyberattacks and Regulatory Regimes By: Frank Nagle, George A. Riedel, William R. Kerr and David Lane
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