We analyze under what conditions credit markets are efficient in providing loans to entrepreneurs who can start a new project after previous failure. An entrepreneur of uncertain talent chooses the riskiness of her project. If banks cannot perfectly observe the risk of previous projects, two...

We study how US branch-banking deregulations affected the entry and exit of firms in the non-financial sector using establishment-level data from the US Census Bureau’s Longitudinal Business Database. The comprehensive micro-data allow us to study how the entry rate, the distribution of entry...

In this study, we use data from the Federal Reserve’s 1993, 1998 and 2003 Surveys of Small Business Finances to classify small businesses into four groups based upon their credit needs and to model the credit allocation process into a sequence of three steps. First, do firms need credit? We...

In this study, we use data from the SSBFs to provide new information about the use of credit by small businesses in the U.S. More specifically, we first analyze firms that do and do not use credit; and then analyze why some firms use trade credit while others use bank credit. We find that one in...

If control of their firms allows entrepreneurs to derive private benefits, it also allows other controlling parties. Private benefits are especially relevant for venture capitalists, who typically get considerable control in their portfolio firms, but not for banks, which are passive loan...

Do firms select their main bank relationship according to their risk or risk preferences? Relationship banking is attractive for high risk firms since it improves their access to finance and provides liquidity insurance. Low risk firms instead may not want to bear the additional costs. I employ...