Article
Journal of Financial Intermediation

Large Banks and Small Firm Lending

By: Vitaly Bord, Victoria Ivashina and Ryan D. Taliaferro

Format:Print

Abstract

We examine the long-lasting effects of the 2007 real estate price collapse on small business credit supply. Banks affected by the decline in real estate prices systematically contracted their credit to small firms. At the same time, regional and local banks, many of which were unaffected by the initial shock, increased small business lending to nearby borrowers and opportunistically expanded their branch networks, making gains in market share that persisted for the following decade. Although the net effect of the contraction in credit was negative, we show that opportunistic expansion tied to permanent market changes is an important offsetting force that dampened the negative effect on small firms during the GFC and its aftermath.

Keywords

Small Firms; Credit Supply; Banking Competition; Small Business; Credit; Financial Crisis; Banks and Banking; Competition

Citation

Bord, Vitaly, Victoria Ivashina, and Ryan D. Taliaferro. "Large Banks and Small Firm Lending." Journal of Financial Intermediation 48 (October 2021).