Credit Where Credit is Due?: Race, Gender, and Discrimination in the Credit Scores of Business Startups
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Author/Creator
Author/Creator ORCID
Date
2015-01-01
Type of Work
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Citation of Original Publication
Henderson, L., Herring, C., Horton, H. D., & Thomas, M. (2015). Credit Where Credit is Due?: Race, Gender, and Discrimination in the Credit Scores of Business Startups. The Review of Black Political Economy, 42(4), 459–479. https://doi.org/10.1007/s12114-015-9215-4
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Use is restricted to non-commercial and no derivatives.
Subjects
Abstract
This research seeks to understand the degree to which credit scores of new business
startups are influenced by racial or gender considerations. It also examines the degree to which
access to business credit lines is influenced by racial and gender-related factors that go beyond
would-be borrowers’ credit scores. Using credit data from new startups, the analysis finds that,
when controlling for firm and human capital characteristics, Black-owned startups receive
lower than expected business credit scores. Moreover, when credit scores, firm characteristics,
and human capital characteristics are taken into consideration, startups owned by people of
color still receive business credit lines that are substantially lower than those of their Whiteowned counterparts, and startups owned primarily by women receive credit lines that are
substantially lower than those owned primarily by men. A Blinder-Oaxaca decomposition
suggests that credit lines for Black-owned businesses would more than double, Latino-owned
businesses’ lines of credit would nearly triple, Asian-owned businesses’ lines of credit would
more than triple, and those where the primary owners are women would be more than twice as
large if their business lines of credit were determined in the same way as those for businesses
owned primarily by Whites and by men.