Working Paper

Banking Consolidation and Small Firm Financing for Research and Development

Abstract: This paper examines the effect of increased market concentration of the banking industry caused by the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) on the availability of finance for small firms engaged in research and development (R&D). I measure the financing decisions of these small firms using a balanced panel of Small Business Innovation Research (SBIR) applications. Using difference-in-differences, I find IBBEA decreased the supply of finance for small R&D firms. This effect is larger for late adopters of IBBEA, which tended to be states with stronger small banking sectors pre-IBBEA.

Keywords: Banking Deregulation; IBBEA; Interstate Bank Branching Deregulation; Market Concentration; Research and Development; Riegle-Neal; Small Business Innovation Research;

JEL Classification: G21; G28; G39; O30;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2016-04-08

Number: 2016-029

Pages: 33 pages