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

Statistical Disparities in Capital Markets
Table 6.16. Models of Failure to Obtain Credit Among Firms that Desired Additional Credit
Specification
a) USA
No Other Control Variables
(n=2,647)
Full Set of Control Variables
(same as Table 6.8, Column 3 except for loan
characteristics)
(n=2,644)
b) ENC
No Other Control Variables
(n=2,647)
Full Set of Control Variables
(same as Table 6.8, Column 3 except for loan
characteristics) (n=2,644)
Source: See Table 6.1.
African
American
0.455
(14.85)
0.276
(6.93)
0.449
(13.29)
0.269
(6.17)
Asian/
Pacific
Islander
0.299
(6.83)
0.180
(3.42)
0.278
(5.96)
0.157
(2.84)
Native
American Hispanic
0.188
(1.57)
-0.009
(0.06)
0.209
(1.58)
0.011
(0.07)
0.297
(7.77)
0.165
(3.51)
0.275
(6.88)
0.141
(2.88)
Nonminority
Female
0.126
(4.01)
0.049
(1.38)
0.122
(3.50)
0.037
(0.95)
Notes: (1) Reported estimates are Probit derivatives, t-statistics in parentheses. (2) The sample consists of all firms
that applied for loans along with those who needed credit, but did not apply for fear of refusal. (3) Failure to obtain
credit includes those firms that were denied and those that did not apply for fear of refusal. (4) Dependent variable is
set to one if the firm failed to obtain credit and to zero if the firm applied for credit and had their loan application
approved.
H. Analysis of Credit Market Discrimination in the U.S. in 1998
We turn next to an examination of the extent to which discrimination in the credit market has
changed since 1993 using data from the 1998 SSBF conducted by the Board of Governors of the
Federal Reserve System. 289 This section updates the estimates obtained above using the 1993
NSSBF. Two complications are that the overall sample size is smaller and a number of the
questions have been changed. However, the result is still clear—African American-owned firms
face discrimination in the credit market. In addition, there is evidence of discrimination in the
credit market against other minority-owned firms as well. We present four sections of evidence,
all of which are consistent with our findings from the 1993 survey.
289 The target population of the survey was for-profit businesses with fewer than 500 employees that were either a
single establishment or the headquarters of a multiple establishment company, and were not agricultural firms,
financial institutions, or government entities. These firms also had to be in business during December 1998. Data
were collected for fiscal year-end 1998. Like its 1993 counterpart, the purpose of this survey was to gather
information about small business financial behavior and the use of financial services and financial service
providers by these firms. The objectives of the survey were to collect information that can inform researchers
and policy makers on the availability of credit to small businesses; the location of the sources of financial
services; the types of financial services used, including checking accounts, savings accounts, various types of
credit, credit cards, trade credit, and equity injections; as well as the firm’s recent credit acquisition experiences.
The survey also investigated the level of debt held by these firms and their accessibility to credit. Additionally,
the survey collected information on firm and owner demographics, as well as the firm’s recent income statement
and balance sheet.
NERA Economic Consulting 213