Working Paper: NBER ID: w25184
Authors: Vitaly M. Bord; Victoria Ivashina; Ryan D. Taliaferro
Abstract: We show that since 2007, there was a large and persistent shift in the composition of lenders to small firms. Large banks impacted by the real estate prices collapse systematically contracted their credit to all small firms throughout the U.S.. However, healthy banks expanded their operations and entered new banking markets. The market share gain of these banks was a standard deviation above the long-run historical market share growth and persists for years following the financial crisis. Despite this offsetting expansion, the net effect of the contraction in credit was negative, with lower aggregate credit and deposits growth, and lower entrepreneurial activity through 2015.
Keywords: No keywords provided
JEL Codes: G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large banks exposed to real estate price declines (G21) | reduction in credit to small firms (G21) |
| healthy banks not exposed to real estate price declines (G21) | expansion of lending operations (G21) |
| reduction in credit to small firms (G21) | lower aggregate credit and deposits growth (E51) |
| lower aggregate credit and deposits growth (E51) | diminished entrepreneurial activity (L26) |
| higher presence of exposed banks (F65) | slower growth in loans and deposits (G21) |
| higher presence of exposed banks (F65) | higher unemployment (J64) |
| higher presence of exposed banks (F65) | decrease in new business creation (M13) |
| mergers and acquisitions of healthy banks (G34) | consolidation of market share (L19) |
| consolidation of market share (L19) | maintenance of lending growth (G21) |