Finance and Economics Discussion Series (FEDS)
April 2016
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
DOI: http://dx.doi.org/10.17016/FEDS.2016.029
PDF: Full Paper