Shared Destinies? Small Banks and Small Business Consolidation
Abstract: We identify a new source of bank consolidation in the United States. For decades, both the financial and real sides of the economy have experienced considerable consolidation. We show that banking-sector consolidation is, in part, a consequence of real-sector consolidation; because small banks are a disproportionate source of small-business credit, they are disproportionately exposed to shocks to small-business growth. Using a Bartik instrument based on national small-business trends and county-level industry exposure, we show that changes to the real-side demand for small-business credit is partially responsible for the relative decline in small banks’ deposits, income, and loan growth.
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Description: Full text
Provider: Federal Reserve Bank of Kansas City
Part of Series: Research Working Paper
Publication Date: 2022-01-14
Number: RWP 21-19