Robert DeYoung, Lawrence G. Goldberg, Lawrence J. White
ABSTRACT
This paper addresses the relationship between the aging process at
new and relatively young banks and the tendency of banks to make loans
to small businesses. Defining small business loans as C&I loans that
are under $1 million in size, we analyze a sample of banks that had assets
of less than $500 million in assets for the years 1993-1996 and that were
25 years of age or younger. We find, as have earlier studies, that banks'
proclivities for small business lending are negatively related to their
age and to their size. We proceed much farther, however, by introducing
a number of additional explanatory variables. We find that small business
lending is negatively related to the number of a bank's branches, to its
recent growth rate, and to a bank's being part of a MBHC. Also, small business
lending is positively related to higher concentration rates in urban areas
but is negatively related to higher concentration in rural areas. Despite
the inclusion of these additional variables, the negative effects of a
bank's age on its small business lending persist, albeit with reduced magnitudes.
We also examine sub-samples of our data. When only "young" banks (ten years
old or less) are considered, the inclusion of the additional variables
causes the effects of age to disappear for freestanding (independent and
OBHC) banks; and when only MBHC banks are considered, age disappears as
a significant influence.
DeYoung: (202) 874-5427 robert.deyoung.occ.treas.gov
Goldberg: (212) 998-0358 lgoldber@stern.nyu.edu
White: (212) 998-0880 lwhite@stern.nyu.edu
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