Does financing spur small business productivity? Evidence from a natural experiment

Scholarly Edition

We analyze how increased access to financing affects firm total factor productivity (TFP) by exploiting a natural experiment following interstate banking deregulations that increased access to bank financing. We find that firms' TFP increases after their states implement these deregulations. Using a regression discontinuity approach based on the 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.

Full Text

Duke Authors

Cited Authors

  • Krishnan, K; Nandy, DK; Puri, M

Published Date

  • June 1, 2015

Start / End Page

  • 1768 - 1809

Digital Object Identifier (DOI)

  • 10.1093/rfs/hhu087

Citation Source

  • Scopus