Banking Deregulations, Financing Constraints and Firm Entry Size

We examine the e¤ect of US branch banking deregulations on the entry size of new …rms using micro-data from the US Census Bureau. We …nd that the average entry size for startups did not change following the deregulations. However, among …rms that survived at least four years, a greater proportion of …rms entered either at their maximum size or closer to the maximum size in the …rst year. The magnitude of these e¤ects were small compared to the much larger changes in entry rates of small …rms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin e¤ects of changes in …nancing constraints. JEL Classi…cation: E44, G21, L26, L43, M13. Key Words: entrepreneurship, entry size, …nancial constraints, banking. Comments are appreciated and can be sent to [email protected] and [email protected]. We thank the editor, an anonymous referee, and participants at the European Economic Association meetings for their very helpful comments. The research in this paper was conducted while the authors were Special Sworn Status researchers of the US Census Bureau at the Boston Census Research Data Center (BRDC). Support for this research from NSF grant (ITR-0427889) is gratefully acknowledged. Research results and conclusions expressed are our own and do not necessarily re‡ect the views of the Census Bureau or NSF. This paper has been screened to insure that no con…dential data are revealed.