Gender and bank lending after the global financial crisis: are women entrepreneurs safer bets?

Abstract

Using gender as a theoretical framework, we analyse the dynamics of bank lending to small- and medium-sized enterprises (SME) in the aftermath of the 2008 global financial crisis. Using six waves of the SME Finance Monitor survey, we apply a formal Oaxaca–Blinder decomposition to test whether gender impacts upon the supply and demand for debt finance by women. Reflecting established evidence, we found women had a lower demand for bank loans; contradicting accepted wisdom however, we found that women who did apply were more likely to be successful. We argue that feminised risk aversion might inform more conservative applications during a period of financial uncertainty which may be beneficial for women in terms of gaining loans. However, we also uncover more subtle evidence suggesting that bank decisions may differ for women who may be unfairly treated in terms of collateral but regarded more positively when holding large cash balances.

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2

Notes

  1. 1.

    There is now some debate regarding sex as a binary biological category given debates around intersex individuals such that it might be argued that there are multiple sex categories (Fine 2017).

  2. 2.

    A note of caution here; whilst there has been much poplar debate and aspersions regarding the desirability of women occupying more influential positions in the investment industry, their jobs have been subject to higher levels of cuts during the recession, they are still a small minority in top positions in leading investment firms whilst the evidence for alleged feminised prudence is based upon gendered stereotypes and myth with little substantive evidence to support such claims.

  3. 3.

    See Van de Ven and Van Pragg (1981) for an introduction of the model.

  4. 4.

    As an alternative, we also fitted the data using the logit model and the results are not significantly different from the probit estimations.

  5. 5.

    The costs include both direct costs including interest charge and collateral requirement, and indirect costs including (a) restrictions/conditions imposed to the loan, (b) potential loss of firm control, (c) time spent on the application and (d) complicated application process or bank literature.

  6. 6.

    It should be noted that the unexplained component U also captures all the other potential effects of differences, for example, in omitted variables.

  7. 7.

    We also attempt other specifications of β* and the results are not significantly different from each other.

References

  1. Ahl, H. (2006). Why research on women entrepreneurs needs new directions. Entrepreneurship Theory and Practice, 30(5), 595–621. https://doi.org/10.1111/j.1540-6520.2006.00138.x.

    Article  Google Scholar 

  2. Ahl, H., & Marlow, S. (2012). Exploring the dynamics of gender, feminism and entrepreneurship: Advancing debate to escape a dead end? Organization, 19(5), 543–562. https://doi.org/10.1177/1350508412448695.

    Article  Google Scholar 

  3. Alsos, G. A., & Ljunggren, E. (2016). The role of gender in entrepreneur–investor relationships: A signaling theory approach. Entrepreneurship Theory and Practice. https://doi.org/10.1111/etp.12226.

  4. Anyadike-Danes, M., Hart, M., & Du, J. (2015). Firm dynamics and job creation in the United Kingdom: 1998–2013. International Small Business Journal, 33(1), 12–27. https://doi.org/10.1177/0266242614552334.

    Article  Google Scholar 

  5. Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. Quarterly Journal of Economics, 116(1), 261–292. https://doi.org/10.1162/003355301556400.

    Article  Google Scholar 

  6. Basch, L. (2009). More women in finance. A more sustainable economy. Christian Science Monitor June, 24, 9.

    Google Scholar 

  7. Baum, C. F., Caglayan, M., & Ozkan, N. (2009). The second moments matter: The impact of macroeconomic uncertainty on the allocation of loanable funds. Economics Letters, 102(2), 87–89. https://doi.org/10.1016/j.econlet.2008.11.019.

    Article  Google Scholar 

  8. Beck, T., & Demirguc-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking & Finance, 30(11), 2931–2943. https://doi.org/10.1016/j.jbankfin.2006.05.009.

    Article  Google Scholar 

  9. Beck, T., Behr, P, Madestam, A. (2014) Sex and credit: Is there a gender bias in lending, Working Paper: 29. Cass Business School, City University, London. doi: https://doi.org/10.2139/ssrn.1923649.

  10. Beckmann, D., & Menkhoff, L. (2008). Will women be women? Analyzing the gender difference among financial experts. Kyklos, 61(3), 364–384. https://doi.org/10.1111/j.1467-6435.2008.00406.x.

    Article  Google Scholar 

  11. Bellucci, A., Borisov, A., & Zazzaro, A. (2010). Does gender matter in bank–firm relationships? Evidence from small business lending. Journal of Banking & Finance, 34(12), 2968–2984. https://doi.org/10.1016/j.jbankfin.2010.07.008.

    Article  Google Scholar 

  12. Berger, A. N., & Udell, G. F. (1995). Relationship lending and lines of credit in small firm finance. Journal of Business, 68(3), 351–381.

    Article  Google Scholar 

  13. Besanko, D., & Thakor, A. V. (1987). Competitive equilibrium in the credit market under asymmetric information. Journal of Economic Theory, 42(1), 167–182. https://doi.org/10.1016/0022-0531(87)90108-6.

    Article  Google Scholar 

  14. Blinder, A. S. (1973). Wage discrimination: reduced form and structural estimates. Journal of Human Resources 8(4), 436–455. https://doi.org/10.2307/144855.

  15. Block, J., Sandner, P., & Spiegel, F. (2015). How do risk attitudes differ within the group of entrepreneurs? The role of motivation and procedural utility. Journal of Small Business Management, 53(1), 183–206. https://doi.org/10.1111/jsbm.12060.

    Article  Google Scholar 

  16. Bowden, P., & Mummery, J. (2014). Understanding feminism. London: Routledge.

  17. Bradley, H. (2007). Gender. Cambridge: Polity.

    Google Scholar 

  18. Broadbridge, A., & Simpson, R. (2011). 25 years on: Reflecting on the past and looking to the future in gender and management research. British Journal of Management, 22(3), 470–483. https://doi.org/10.1111/j.1467-8551.2011.00758.x.

    Article  Google Scholar 

  19. Butler, J. (2004). Undoing gender. Psychology Press.

  20. Calas, M. B., Smircich, L., & Bourne, K. A. (2009). Extending the boundaries: Reframing “entrepreneurship as social change” through feminist perspectives. The Academy of Management Review, 34(3), 552–569. https://doi.org/10.5465/amr.2009.40633597.

    Article  Google Scholar 

  21. Carter, S., Shaw, E., Lam, W., & Wilson, F. (2007). Gender, entrepreneurship, and bank lending: The criteria and processes used by bank loan officers in assessing applications. Entrepreneurship Theory and Practice, 31(3), 427–444. https://doi.org/10.1111/j.1540-6520.2007.00181.x.

    Article  Google Scholar 

  22. Carter, S., Mwaura, S., Ram, M., Trehan, K., & Jones, T. (2015). Barriers to ethnic minority and women’s enterprise: Existing evidence, policy tensions and unsettled questions. International Small Business Journal, 33(1), 49–69. https://doi.org/10.1177/0266242614556823.

    Article  Google Scholar 

  23. Catalyst. (2011). Women in Canadian, US, and Global Financial Services. Retrieved March, 2017, from http://www.catalyst.org/publication/245/women-in-financial-services.

  24. Cesaroni, F. M., Sentuti, A., & Buratti, A. (2015). Same crisis, different strategies? Italian men and women entrepreneurs in front of the economic recession. Journal of Research in Gender Studies, 5(2), 205.

    Google Scholar 

  25. Ciciretti, R., Hasan, I., & Zazzara, C. (2009). Do internet activities add value? Evidence from the traditional banks. Journal of Financial Services Research, 35(1), 81–98. https://doi.org/10.1007/s10693-008-0039-2.

    Article  Google Scholar 

  26. Coco, G. (2000). On the use of collateral. Journal of Economic Surveys, 14(2), 191–214. https://doi.org/10.1111/1467-6419.00109.

    Article  Google Scholar 

  27. Cole, R. A. (2013). What do we know about the capital structure of privately held US firms? Evidence from the surveys of small business finance. Financial Management, 42(4), 777–813. https://doi.org/10.1111/fima.12015.

    Article  Google Scholar 

  28. Coleman, S., & Robb, A. (2009). A comparison of new firm financing by gender: Evidence from the Kauffman Firm Survey data. Small Business Economics, 33(4), 397–411. https://doi.org/10.1007/s11187-009-9205-7.

    Article  Google Scholar 

  29. Coleman, S., & Robb, A. (2015). Access to capital by high-growth women-owned businesses (pp. 1–32). Washington DC: National Women’s Business Council.

    Google Scholar 

  30. Cosh, A., Cumming, D., & Hughes, A. (2009). Outside enterpreneurial capital. The Econometrics Journal, 119(540), 1494–1533. https://doi.org/10.1111/j.1468-0297.2009.02270.x.

    Article  Google Scholar 

  31. Cowling, M., Liu, W., & Ledger, A. (2012). Small business financing in the UK before and during the current financial crisis. International Small Business Journal, 30(7), 778–800. https://doi.org/10.1177/0266242611435516.

    Article  Google Scholar 

  32. Cowling, M., Liu, W., Ledger, A., & Zhang, N. (2015). What really happens to small and medium-sized enterprises in a global economic recession? UK evidence on sales and job dynamics. International Small Business Journal, 33(5), 488–513. https://doi.org/10.1177/0266242613512513.

    Article  Google Scholar 

  33. Cowling, M., Liu, W., Minniti, M., & Zhang, N. (2016). UK credit and discouragement during the GFC. Small Business Economics, 47(4), 1049–1074. https://doi.org/10.1007/s11187-016-9745-6.

    Article  Google Scholar 

  34. Croson, R., & Gneezy, U. (2009). Gender differences in preferences. Journal of Economic Literature, 47(2), 448–474. https://doi.org/10.1257/jel.47.2.448.

    Article  Google Scholar 

  35. De Rassenfosse, G., & Fischer, T. (2016). Venture debt financing: Determinants of the lending decision. Strategic Entrepreneurship Journal, 10(3), 235–256. https://doi.org/10.1002/sej.1220.

    Article  Google Scholar 

  36. Delis, M. D., Hasan, I., & Tsionas, E. G. (2015). Banks’ risk endogenous to strategic management choices. British Journal of Management, 26(4), 637–656. https://doi.org/10.1111/1467-8551.12111.

    Article  Google Scholar 

  37. Deloitte (2016) Women entrepreneurs: Developing collaborative ecosystems for success, https://www.womensbusinesscouncil.co.uk/wp-content/uploads/2017/02/deloitte-uk-wom-entr20161.pdf

  38. Duarte, F. D., Gama, A. P. M., & Gulamhussen, M. A. (2018). Defaults in bank loans to SMEs during the financial crisis. Small Business Economics, 51(3), 591–608. https://doi.org/10.1007/s11187-017-9944-9.

    Article  Google Scholar 

  39. Eddleston, K. A., Ladge, J. J., Mitteness, C., & Balachandra, L. (2016). Do you see what I see? Signaling effects of gender and firm characteristics on financing entrepreneurial ventures. Entrepreneurship Theory and Practice, 40(3), 489–514. https://doi.org/10.1111/etap.12117.

    Article  Google Scholar 

  40. Einav, L., Jenkins, M., & Levin, J. (2013). The impact of credit scoring on consumer lending. The Rand Journal of Economics, 44(2), 249–274. https://doi.org/10.1111/1756-2171.12019.

    Article  Google Scholar 

  41. European Investment Bank. (2015). Investment and investment finance in Europe. http://www.eib.org/attachments/efs/investment_and_investment_finance_in_europe_2015_en.pdf

  42. Fairlie, R. W., & Robb, A. M. (2009). Gender differences in business performance: Evidence from the Characteristics of Business Owners survey. Small Business Economics, 33(4), 375–395. https://doi.org/10.1007/s11187-009-9207-5.

    Article  Google Scholar 

  43. Fine, C. (2010). Delusions of gender. London: Icon Books.

    Google Scholar 

  44. Fine, C. (2017). Testosterone rex: Unmaking the myths of our gendered minds. London: Icon Books.

    Google Scholar 

  45. Foglia, A., Laviola, S., & Reedtz, P. M. (1998). Multiple banking relationships and the fragility of corporate borrowers. Journal of Banking & Finance, 22(10–11), 1441–1456. https://doi.org/10.1016/S0378-4266(98)00058-2.

    Article  Google Scholar 

  46. Fougère, D., Golfier, C., Horny, G., & Kremp, E. (2012). Did the 2008 crisis affect the survival of French firms? Mimeo, Banque de France.

  47. Frame, W. S., & White, L. J. (2014). Technological change, financial innovation, and diffusion in banking. In A. N. Berger, P. Molyneux, & J. O. S. Wilson (Eds.), The oxford handbook of banking. Oxford: Oxford University Press.

    Google Scholar 

  48. Freel, M., Carter, S., Tagg, S., & Mason, C. (2012). The latent demand for bank debt: Characterizing “discouraged borrowers”. Small Business Economics, 38(4), 399–418. https://doi.org/10.1007/s11187-010-9283-6.

    Article  Google Scholar 

  49. Goh, K. H., & Kauffman, R. J. (2013). Firm strategy and the Internet in US commercial banking. Journal of Management Information Systems, 30(2), 9–40. https://doi.org/10.2753/MIS0742-1222300201.

    Article  Google Scholar 

  50. Grilli, L. (2011). When the going gets tough, do the tough get going? The pre-entry work experience of founders and high-tech start-up survival during an industry crisis. International Small Business Journal, 29(6), 626–647. https://doi.org/10.1177/0266242610372845.

    Article  Google Scholar 

  51. Han, L., Zhang, S., & Greene, F. J. (2017). Bank market concentration, relationship banking, and small business liquidity. International Small Business Journal, 35(4), 365–384. https://doi.org/10.1177/0266242615618733.

    Article  Google Scholar 

  52. Hastings, J. S., Madrian, B. C., & Skimmyhorn, W. L. (2013). Financial literacy, financial education, and economic outcomes. Annual Review of Economics, 5(1), 347–373. https://doi.org/10.1146/annurev-economics-082312-125807.

    Article  Google Scholar 

  53. Henry, C., Foss, L., & Ahl, H. (2016). Gender and entrepreneurship research: A review of methodological approaches. International Small Business Journal, 34(3), 217–241. https://doi.org/10.1177/0266242614549779.

    Article  Google Scholar 

  54. Hernando, I., & Nieto, M. J. (2007). Is the internet delivery channel changing banks’ performance? The case of Spanish banks. Journal of Banking & Finance, 31(4), 1083–1099. https://doi.org/10.1016/j.jbankfin.2006.10.011.

    Article  Google Scholar 

  55. Huang, J., & Kisgen, D. J. (2013). Gender and corporate finance: Are male executives overconfident relative to female executives? Journal of Financial Economics, 108(3), 822–839. https://doi.org/10.1016/j.jfineco.2012.12.005.

    Article  Google Scholar 

  56. Hyytinen, A., & Pajarinen, M. (2007). Is the cost of debt capital higher for younger firms? Scottish Journal of Political Economy, 54(1), 55–71. https://doi.org/10.1111/j.1467-9485.2007.00404.x.

    Article  Google Scholar 

  57. Isaksson, A., & Quoreshi, A. S. (2015). The impact of social factors on external financing of newly founded businesses. Center for Innovation and Technology Research Working Paper Series 2015/1.

  58. Ivashina, V., & Scharfstein, D. (2010). Bank lending during the financial crisis of 2008. Journal of Financial Economics, 97(3), 319–338. https://doi.org/10.1016/j.jfineco.2009.12.001.

    Article  Google Scholar 

  59. Jennings, J. E., & Brush, C. G. (2013). Research on women entrepreneurs: Challenges to (and from) the broader entrepreneurship literature? The Academy of Management Annals, 7(1), 663–715. https://doi.org/10.1080/19416520.2013.782190.

    Article  Google Scholar 

  60. Jones-Evans, D. (2015). Access to finance to SMEs at a regional level—The case of Finance Wales. Venture Capital, 17(1/2), 27–41. https://doi.org/10.1080/13691066.2015.1052624.

    Article  Google Scholar 

  61. Kaiser, A. (2012). Reconceptualising sex and gender in the human brain. The Journal of Psychology, 220(2), 130–136. https://doi.org/10.1027/2151-2604/a000104.

    Article  Google Scholar 

  62. Kay, K., & Shipman, C. (2009). Fixing the economy? It’s women’s work. The Washington Post.

  63. Lee, N., Sameen, H., & Cowling, M. (2015). Access to finance for innovative SMEs since the financial crisis. Research Policy, 44(2), 370–380. https://doi.org/10.1016/j.respol.2014.09.008.

    Article  Google Scholar 

  64. Leeth, J. D., & Scott, J. A. (1989). The incidence of secured debt: Evidence from the small business community. Journal of Financial and Quantitative Analysis, 24(03), 379–394. https://doi.org/10.2307/2330818.

    Article  Google Scholar 

  65. Lim, Y., & Suh, C. S. (2019). Where is my partner? The role of gender in the formation of entrepreneurial businesses. Small Business Economics, 52(1), 131–151. https://doi.org/10.1007/s11187-018-0027-3.

    Article  Google Scholar 

  66. Lindsey, L. L. (2015). Gender roles: A sociological perspective. Routledge.

  67. Linstead, S., & Pullen, A. (2006). Gender as multiplicity: Desire, displacement, difference and dispersion. Human Relations, 59(9), 1287–1310.

  68. Marlow, S., & Martinez-Dy, A. (2018). Is it time to rethink the gender agenda in entrepreneurship research? International Small Business Journal, 36(1), 3–22. https://doi.org/10.1177/0266242617738321.

    Article  Google Scholar 

  69. Marlow, S., & McAdam, M. (2013). Gender and entrepreneurship: Advancing debate and challenging myths; exploring the mystery of the under-performing female entrepreneur. International Journal of Entrepreneurial Behavior and Research, 19(1), 114–124. https://doi.org/10.1108/13552551311299288.

    Article  Google Scholar 

  70. Marlow, S., & McAdam, M. (2015). Incubation or induction? Gendered identity work in the context of technology business incubation. Entrepreneurship Theory and Practice, 39(4), 791–816. https://doi.org/10.1111/etap.12062.

    Article  Google Scholar 

  71. Marlow, S., & Patton, D. (2005). All credit to men? Entrepreneurship, finance, and gender. Entrepreneurship Theory and Practice, 29(6), 717–735. https://doi.org/10.1111/j.1540-6520.2005.00105.x.

    Article  Google Scholar 

  72. Marlow, S., & Swail, J. (2014). Gender, risk and finance: Why can’t a woman be more like a man? Entrepreneurship and Regional Development, 26(1–2), 80–96. https://doi.org/10.1080/08985626.2013.860484.

    Article  Google Scholar 

  73. Marlow, S., Carter, S., & Shaw, E. (2008). Constructing female entrepreneurship policy in the UK: Is the US a relevant benchmark? Environment and Planning. C, Government & Policy, 26(2), 335–351. https://doi.org/10.1068/c0732r.

    Article  Google Scholar 

  74. McAdam, M. (2012). Female entrepreneurship. London: Routledge.

    Google Scholar 

  75. McNulty, J. E., Murdock, M., & Richie, N. (2013). Are commercial bank lending propensities useful in understanding small firm finance? Journal of Economics and Finance, 37(4), 511–527. https://doi.org/10.1007/s12197-011-9191-x.

    Article  Google Scholar 

  76. Melnik, A., & Plaut, S. (1986). Loan commitment contracts, terms of lending, and credit allocation. The Journal of Finance, 41(2), 425–435. https://doi.org/10.1111/j.1540-6261.1986.tb05046.x.

    Article  Google Scholar 

  77. Oakley, A. (1979). Becoming a mother. New York: Schocken.

    Google Scholar 

  78. Oakley, A. (2015). Sex, gender and society. Farnham: Ashgate.

    Google Scholar 

  79. Oaxaca, R. (1973). Male-female wage differentials in urban labor markets. International Economic Review, 14(3), 693–709. https://doi.org/10.2307/2525981.

  80. Piacentini, M. (2013). Women entrepreneurs in the OECD. Paris: OECD Publishing, No. 1815-199X.

  81. Post, C., & Byron, K. (2015). Women on boards and firm financial performance: A meta-analysis. The Academy of Management Journal, 58(5), 1546–1571. https://doi.org/10.5465/amj.2013.0319.

    Article  Google Scholar 

  82. Prügl, E. (2012). “If Lehman Brothers had been Lehman Sisters…”: Gender and myth in the aftermath of the financial crisis. International Political Sociology, 6(1), 21–35. https://doi.org/10.1111/j.1749-5687.2011.00149.x.

    Article  Google Scholar 

  83. Robb, A. M., & Watson, J. (2012). Gender differences in firm performance: Evidence from new ventures in the United States. Journal of Business Venturing, 27(5), 544–558. https://doi.org/10.1016/j.jbusvent.2011.10.002.

    Article  Google Scholar 

  84. Roberts, A. (2015). Gender, financial deepening and the production of embodied finance: Towards a critical feminist analysis. Global Society, 29(1), 107–127. https://doi.org/10.1080/13600826.2014.975189.

    Article  Google Scholar 

  85. Rostamkalaei, A., Nitani, M., & Riding, A. (2018). Borrower discouragement: The role of informal turndowns. Small Business Economics. https://doi.org/10.1007/s11187-018-0086-5.

  86. Rybczynski, K. (2015). What drives self-employment survival for women and men? Evidence from Canada. Journal of Labor Research, 36(1), 27–43. https://doi.org/10.1007/s12122-014-9194-4.

    Article  Google Scholar 

  87. Scherer, M. (2010). The new sheriffs of Wall Street. Times Magazine.

  88. Sharpe, S. A. (1990). Asymmetric information, bank lending, and implicit contracts: A stylized model of customer relationships. The Journal of Finance, 45(4), 1069–1087. https://doi.org/10.1111/j.1540-6261.1990.tb02427.x.

    Article  Google Scholar 

  89. Smallbone, D., Deakins, D., Battisti, M., & Kitching, J. (2012). Small business responses to a major economic downturn: Empirical perspectives from New Zealand and the United Kingdom. International Small Business Journal, 30(7), 754–777. https://doi.org/10.1177/0266242612448077.

    Article  Google Scholar 

  90. Speelman, C. P., Clark-Murphy, M., & Gerrans, P. (2013). Decision making clusters in retirement savings: Gender differences dominate. Journal of Family and Economic Issues, 34(3), 329–339. https://doi.org/10.1007/s10834-012-9334-z.

    Article  Google Scholar 

  91. Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71(3), 393–410. https://doi.org/10.7916/D8VX0SHB/download.

    Article  Google Scholar 

  92. Stiglitz, J. E., & Weiss, A. (1983). Incentive effects of terminations: Applications to the credit and labor markets. The American Economic Review, 73(5), 912–927.

    Google Scholar 

  93. Sunderland, R. (2009). The real victims of this credit crunch? Women. The Guardian/Observer, Available at http://www.guardian.co.uk/lifeandstyle/2009/jan/18/women-credit-crunch-ruth-sunderland. (Accessed February 15, 2018).

  94. Thébaud, S., & Sharkey, A. J. (2016). Unequal hard times: The influence of the great recession on gender bias in entrepreneurial financing. Sociological Science, 3(1), 1–31. https://doi.org/10.1002/sej.18.

    Article  Google Scholar 

  95. Verheul, I., Thurik, R., Grilo, I., & Van der Zwan, P. (2012). Explaining preferences and actual involvement in self-employment: Gender and the entrepreneurial personality. Journal of Economic Psychology, 33(2), 325–341. https://doi.org/10.1016/j.joep.2011.02.009.

    Article  Google Scholar 

  96. Vermoesen, V., Deloof, M., & Laveren, E. (2013). Long-term debt maturity and financing constraints of SMEs during the global financial crisis. Small Business Economics, 41(2), 433–448. https://doi.org/10.1007/s11187-012-9435-y.

    Article  Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Marc Cowling.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendix. Details of the Blinder–Oaxaca decomposition

Appendix. Details of the Blinder–Oaxaca decomposition

In the context of this study, let YF and YM denote the outcome variables for models estimating the probabilities of demanding loans or loan application being granted for male and female owned ventures, respectively; and X a vector of predictors for Y. We are interested in how much of the mean outcome difference,

$$ \varDelta =E\left({Y}_M\right)-E\left({Y}_F\right) $$
(1)

where E(Y) is the predicted outcome variable from a linear probit model, is accounted for by group differences in the predictors X.

Further let β be the coefficient estimates from the model, it can be shown that following the standard assumptions of linear regressions, the mean outcome difference Δ can be written as:

$$ \varDelta =E\left({Y}_M\right)-E\left({Y}_F\right)=E{\left({X}_M\right)}^{\hbox{'}}{\beta}_M-E{\left({X}_F\right)}^{\hbox{'}}{\beta}_F $$
(2)

Now, if we introduce a ‘non-discriminatory’ coefficient vector β* embedded in the coefficient estimates β, that accounts for the part of mean outcome probability differences explained by the predictors, Eq. (2) can be rearranged as:

$$ \varDelta ={\left[E\left({X}_M\right)-E\left({X}_F\right)\right]}^{\hbox{'}}{\beta}^{\ast }+\left[E{\left({X}_M\right)}^{\hbox{'}}\left({\beta}_M-{\beta}^{\ast}\right)+E{\left({X}_F\right)}^{\hbox{'}}\left({\beta}^{\ast }-{\beta}_F\right)\right] $$
(3)

Equation (3) can be seen as a twofold decomposition where the first component,

$$ Q={\left[E\left({X}_M\right)-E\left({X}_F\right)\right]}^{\hbox{'}}{\beta}^{\ast } $$
(4)

is defined as the ‘quantity effect’ referring to the part of the outcome differential explained by group differences in X. In turn, the second component,

$$ U=E{\left({X}_M\right)}^{\hbox{'}}\left({\beta}_M-{\beta}^{\ast}\right)+E{\left({X}_F\right)}^{\hbox{'}}\left({\beta}^{\ast }-{\beta}_F\right) $$
(5)

can be seen as the unexplained part usually attributed to discrimination,Footnote 6 as it depicts the differences in the sensitivities to predictors for different groups. The non-discriminatory coefficient vector β* is suggested in previous studies either to be equal to the coefficient estimates of one of the groups (e.g. male) assuming that discrimination is only directed towards the other group (e.g. female), or a weighted average of group coefficient estimates βM and βF, or the coefficients from a pooled regression. In this study, we define β* as the coefficients from pooled probit regressions on loan demand and supply.Footnote 7

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Cowling, M., Marlow, S. & Liu, W. Gender and bank lending after the global financial crisis: are women entrepreneurs safer bets?. Small Bus Econ 55, 853–880 (2020). https://doi.org/10.1007/s11187-019-00168-3

Download citation

Keywords

  • Gender
  • Finance
  • Bank lending
  • Risk
  • Discrimination

JEL classification

  • G32
  • J16
  • L26