Working Paper: CEPR ID: DP17335
Authors: Toni Ahnert; Sebastian Doerr; Nicola Pierri; Yannick Timmer
Abstract: We study the importance of information technology (IT) in banking for entrepreneurship. Guided by a parsimonious model, we establish that job creation by young firms is stronger in US counties more exposed to banks with greater IT adoption. We present evidenceconsistent with banks' IT adoption spurring entrepreneurship through a collateral channel: entrepreneurship increases by more in IT-exposed counties when house prices rise. Further analysis suggests that IT improves banks' ability to determine collateral values, in particular when collateral appraisal is more complex. IT also reduces the time and cost of disbursing collateralized loans.
Keywords: Technology in Banking; Entrepreneurship; Information Technology; Collateral; Screening
JEL Codes: D82; G21; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| IT adoption in banking (G21) | entrepreneurship (M13) |
| IT adoption in banking (G21) | collateralized lending efficiency (G21) |
| collateralized lending efficiency (G21) | entrepreneurship (M13) |
| IT exposure (F33) | job creation by young firms (L26) |
| house prices rise + IT adoption (R21) | entrepreneurship increase (L26) |
| IT adoption (L86) | responsiveness of credit supply to local economic conditions (E51) |
| IT exposure + collateral values rise (F65) | job creation by startups (L26) |
| IT exposure (F33) | job creation by startups in industries reliant on real estate collateral (R33) |