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 bankin g industry, The consolidation, though, has stimulated an upsurge in ne w bank charters. This study compares the lending by de novo banks to s mall businesses with the lending by similarly sized incumbent banks fo r the years 1987-1994, We find that the portfolios of de novo banks co nsistently contain a substantially higher percentage of small business loans than do the portfolios of similar incumbents. These results ind icate that de novo banks can be part of the solution to the problems t hat consolidation may create, (C) 1998 Elsevier Science B.V. All right s reserved.