CREDIT RATIONING AND BLACK-OWNED FIRMS: IS THERE EVIDENCE OF DISCRIMINATION?
Vol. Volume 14 Number 3 September/2009
This article uses data from the 2003 Survey of Small Business Finances to determine if banks ration credit more severely to black-owned firms. Our results reveal this is the case. Using the Heckman two-step procedure, we determined that black- and white-owned firms have a comparable demand for credit as measured by their actual use of lines of credit. Controlling for firm and owner characteristics, however, black-owned firms had lower line of credit limits suggesting constraints in supply. Further, our findings suggest the supply of credit to black-owned firms is even more severely constrained than is the case for other minority-owned firms. These findings highlight the possibility of discrimination against black-owned firms in the form of credit rationing.
black-owned firms, credit rationing, discrimination in lending.