The State of Minority- and Women- Owned ... - Cleveland.com

Statistical Disparities in Capital Markets
• Minority-owned firms were more likely to report that they did not apply for a loan over
the preceding three years because they feared the loan would be denied (see Tables 6.15,
6.22, 6.29).
• When minority-owned firms applied for a loan, their loan requests were substantially
more likely to be denied than non-minorities, even after accounting for differences like
firm size and credit history (see Tables 6.8, 6.9, 6.18, 6.19, 6.25, 6.26).
• When minority-owned firms did receive a loan, they were obligated to pay higher interest
rates on the loans than comparable nonminority-owned firms (see Tables 6.13, 6.14, 6.21,
6.27).
• A larger proportion of minority-owned firms than nonminority-owned firms report that
credit market conditions are a serious concern (see Tables 6.3, 6.4, 6.5, 6.6, 6.7, 6.17,
6.24).
• A larger share of minority-owned firms than nonminority-owned firms believes that the
availability of credit is the most important issue likely to confront them in the upcoming
year (see Tables 6.5, 6.6).
• There is no evidence that discrimination in the market for credit is significantly different
in the East North Central census division or in the construction and construction-related
professional services industries than it is in the nation or the economy as a whole (various
tables).
• There is no evidence that the level of discrimination in the market for credit has
diminished between 1993 and 2003 (various tables).
The structure of this Chapter is as follows. First, we outline the main theories of discrimination
and discuss how they might be tested. Second, we examine the evidence on the existence of
capital/liquidity constraints facing individuals in the mortgage market, households in the nonmortgage
loan market, and for small businesses in the commercial credit market. Third, we
describe the data files used in the remainder of the Chapter and then examine in more detail
problems faced by minority-owned firms in obtaining credit. Fourth, we provide a series of
answers to criticisms. Finally, we present our conclusions.
We begin with the 1993 dataset and continue chronologically through the 2003 dataset and then
to evidence from NERA’s own comparable surveys conducted in various geographies between
1999 and 2007. This chronological progression allows the reader to see the consistency of the
main findings over time. This approach serves as well to demonstrate the value of over-sampling
minority and female small business owners, as was the case in the 1993 and 1998 surveys, but
not the 2003 survey. Unfortunately, the much anticipated 2008 survey results never materialized
because the Federal Reserve cancelled this important survey effort. 254
254 For more on this, see fn. 295 below.
NERA Economic Consulting 183