TY - JOUR
T1 - Differential Access to Capital from Financial Institutions by Minority Entrepreneurs
AU - Palia, Darius
N1 - Publisher Copyright:
© 2016 Cornell Law School and Wiley Periodicals, Inc.
PY - 2016/12/1
Y1 - 2016/12/1
N2 - This article examines whether minority small business borrowers have the same access to loans from financial institutions as similar white borrowers. Using matching methods, I find that African-American borrowers are rejected at an approximately 30 percent higher probability than similar white borrowers. I also find that the impact of unobservable variables has to be greater than 85 percent the impact of observable variables to show no discrimination. This bound seems to be a high number given that I have controlled for a large number of borrower, firm, and lender characteristics. No such differential effect is found for Asian and other minority borrowers. I also find equal expected default losses between African-American and white borrowers. These results are consistent with the information-based, laissez faire, and group hoarding theories of discrimination, and against the taste-based theory of discrimination.
AB - This article examines whether minority small business borrowers have the same access to loans from financial institutions as similar white borrowers. Using matching methods, I find that African-American borrowers are rejected at an approximately 30 percent higher probability than similar white borrowers. I also find that the impact of unobservable variables has to be greater than 85 percent the impact of observable variables to show no discrimination. This bound seems to be a high number given that I have controlled for a large number of borrower, firm, and lender characteristics. No such differential effect is found for Asian and other minority borrowers. I also find equal expected default losses between African-American and white borrowers. These results are consistent with the information-based, laissez faire, and group hoarding theories of discrimination, and against the taste-based theory of discrimination.
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U2 - 10.1111/jels.12132
DO - 10.1111/jels.12132
M3 - Article
AN - SCOPUS:84996503586
SN - 1740-1453
VL - 13
SP - 756
EP - 785
JO - Journal of Empirical Legal Studies
JF - Journal of Empirical Legal Studies
IS - 4
ER -