Does Financing Spur Small Business Productivity? Evidence from a Natural Experiment / Karthik Krishnan, Debarshi Nandy, Manju Puri.

Format:

Book

Author/Creator:

Krishnan, Karthik.

Contributor:

National Bureau of Economic Research.

Nandy, Debarshi.

Puri, Manju.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20149.

NBER working paper series no. w20149

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

We analyze how increased access to financing affects firm total factor productivity (TFP) by exploiting a natural experiment following interstate banking deregulations which increased access to bank financing. We find that firms' TFP increases after their states implement these deregulations. Using a regression discontinuity approach based on Small Business Administration's funding eligibility criteria, we show that TFP increases following the deregulations are significantly greater for financially constrained firms. Our results suggest that greater access to financing allows financially constrained firms to invest in productive projects that may otherwise not be taken up.

Notes:

Print version record

May 2014.