AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Black-Owned Firms, Financial Constraints, and the Firm Size Gap
AEA Papers and Proceedings
vol. 112,
May 2022
(pp. 282–86)
Abstract
We document the smaller average employment size and lower financial access of Black-owned businesses compared to White-owned businesses. Controlling for other characteristics, we find that observed differences in finance account for 60 percent of the 11.3 percent racial gap in number of employees; differences in returns account for 103 percent. The results imply that if both the levels and returns on finance were equalized across races, then Black-owned firms would be 18.4 percent larger than their actual size. Equalizing financial factors alone would reverse the firm size gap so that Black-owned firms would be larger than White-owned firms by 7.1 percent.Citation
Brown, J. David, John S. Earle, Mee Jung Kim, Kyung Min Lee, and Jared Wold. 2022. "Black-Owned Firms, Financial Constraints, and the Firm Size Gap." AEA Papers and Proceedings, 112: 282–86. DOI: 10.1257/pandp.20221027Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- L25 Firm Performance: Size, Diversification, and Scope