Does Financing Spur Small Business Productivity? Evidence from a Natural Experiment

NBER Working Paper No. 20149

Issued in May 2014

NBER Program(s):Corporate Finance, Productivity, Innovation, and Entrepreneurship



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.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20149

Published: Karthik Krishnan & Debarshi K. Nandy & Manju Puri, 2015. "Does Financing Spur Small Business Productivity? Evidence from a Natural Experiment," Review of Financial Studies, Society for Financial Studies, vol. 28(6), pages 1768-1809. citation courtesy of

Users who downloaded this paper also downloaded* these: