De novo banks and lending to small businesses: An empirical analysis

Recent widespread consolidation in the banking industry has elicited, concern that lending to small businesses will be reduced by the banking industry, The consolidation, though, has stimulated an upsurge in new bank charters. This study compares the lending by de novo banks to small businesses with the lending by similarly sized incumbent banks for the years 1987-1994, We find that the portfolios of de novo banks consistently contain a substantially higher percentage of small business loans than do the portfolios of similar incumbents. These results indicate that de novo banks can be part of the solution to the problems that consolidation may create, (C) 1998 Elsevier Science B.V. All rights reserved.