Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, December 7, 2009

Banking Deregulations, Financing Constraints, and Firm Entry Size

Posted by D. Daniel Sokol

William Kerr (Harvard Business School) and Ramana Nanda examine Banking Deregulations, Financing Constraints, and Firm Entry Size.

ABSTRACT: We examine the effect of US branch banking deregulations on the entry size of new firms using micro-data from the US Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, among firms that survived at least four years, a greater proportion of firms entered either at their maximum size or closer to the maximum size in the first year. The magnitude of these effects were small compared to the much larger changes in entry rates of small firms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/12/banking-deregulations-financing-constraints-and-firm-entry-size.html

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