Bank Specialization in Lending to New Firms

When: 27 May 2024, 14:15-15:30
Where: HoF 1.01 + online
Speaker: Diana Bonfim

Hybrid event.

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Meeting ID: 692 5492 2175


We formulate a novel dimension of bank-lending specialization—specialization in lending to new firms—and investigate its impact on the creation, credit access, and survival of new businesses. We exploit a Portuguese reform that drastically reduced the red tape of starting a new firm and that was rolled out in a staggered manner across municipalities. We show that while reducing regulatory barriers stimulates business creation, this effect depends crucially on the pre-reform local presence of bank branches specialized in lending to new firms. A greater presence of such branches is associated with improved credit access and higher leverage of new local businesses. Moreover, new firms that obtain loans from specialized branches exhibit an up to 12 percent higher survival rate.