Bank Consolidation and Small Business Lending in the Aftermath of the U.S. Financial Crisis: Evidence from California’s Banking Markets

• In Event: Financial Accounting and Reporting # 2

Abstract

In the last two decades, the extensive consolidation of the banking industry, and its likely consequences of increased presence of large banking institution as well as concentration in local banking markets, have raised concerns about the ability of small businesses to obtain funds. The effects of consolidation on small business lending may be more pronounced during a credit squeeze when the supply of loans becomes increasingly scarce. Our findings suggest that small business lending growth declined in California’s moderately concentrated and highly concentrated urban banking markets relative to unconcentrated ones after the financial crisis of 2008. We also find that the effect of market share structure on small business lending growth is moderated by market concentration in the post-crisis era.

Authors

• Burak Dolar, Western Washington University

• Gokhan Karahan, Delta State University