Does banking competition affect startup activity in the United States?

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Supervisors: Iania, Leonardo
Faculty: Louvain School of Management
Degree label: Master [120] : ingénieur de gestion, à finalité spécialisée
Abstract: The Interstate Banking and Branching Efficiency Act (IBBEA) of 1994 represented a major milestone in the U.S. banking deregulation process, as it permitted banks to open branches and buy other banks across state borders. We exploit the relaxation of IBBEA branching provisions with recent data from the Startup Cartography Project to estimate the impact of banking competition on entrepreneurship. The findings suggest that while there is a slight decrease in business entry and startup potential following the IBBEA implementation, the changes in branching provisions have a more permanent positive impact on both measures of entrepreneurship. This study argues that states that removed barriers later in the deregulation process experienced more pronounced effects on their startup ecosystems. Additionally, states with poor competitive banking markets benefited the most from these policies. This last finding supports the idea that banking competition plays an important role in fostering small business activities in the United States. Overall, these results provide further insights into how banking deregulation impacts states and how other factors can influence state responses to these policies.

Somville, V. (2023). Does banking competition affect startup activity in the United States? https://dial-mem.test.bib.ucl.ac.be/handle/2078.2/36475