Federal Reserve System and the Conference of State Bank Supervisors

Community Banking in the 21st Century

October 2, 2013, Federal Reserve Bank of St. Louis

Smith Williams, Do Community Banks Play a Role in New Firm Survival?

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Smith Williams of the Federal Deposit Insurance Corp. (FDIC) presents her paper “Do Community Banks Play a Role in New Firm Survival?” co-written with Yan Lee, also at the FDIC. The authors find that the farther away new businesses are from banking services, the less likely they are to engage the bank to finance their operations.

Do Community Banks Play a Role in New Firm Survival? (PDF)

Abstract: In the United States, net job creation is largely a story of new and young firms (Neumark, Wall and Zhang 2008; Haltiwanger, Jarmin and Miranda 2010; and Kane 2010). New firms create more new jobs each year than any other firm age group. Kane (2010) estimates that new firms generate at least four times the average annual number of jobs created by any other age group. Start-up firms also have higher rates of employment growth in their early years than do older firms, conditional on survival (Haltiwanger Jarmin, and Miranda 2010). However, many new firms, and their associated jobs, do not survive more than a few years. Haltiwanger, Jarmin and Miranda estimate that firm deaths eliminate 40 percent of the jobs created by start-ups within the first five years. These authors interpret the high rates of job creation and destruction by new firms as evidence of an up-or-out dynamic—a new firm either grows or dies. This study explores whether community banks play a role in increasing a new firms’ access to capital and, consequently, start-ups’ chances of survival.

Conference Videos

Welcome & Overview (Oct. 2)
Moderator: Julie Stackhouse (5:29)

Opening Remarks
John Ryan (4:58)
James Bullard (4:39)
Ben Bernanke (8:40)

Research Session 1: The Role of Community Banks
Research Session 1 Moderator: Scott E. Hein (5:35)
Do Community Banks Play a Role in New Firm Survival? (Smith Williams) (18:27)
Equipment Lease Financing: The Role of Community Banks (Mohammed Khayum) (13:24)
Equipment Lease Financing: The Role of Community Banks (Charles Kelly) (14:03)
Small Business Lending and Social Capital: Are Rural Relationships Different? (Kenneth Spong) (25:08)
Bank Failure, Relationship Lending and Local Economic Performance (John Kandrac) (22:32)
Q&A (16:07)

Evening Keynote Address
Dorothy Savarese (38:04)

Community Banking Performance (Oct. 3)
Moderator: Richard Brown (5:07)
Financial Derivatives at Community Banks (Shelly Shen) (11:12)
Lessons from Community Banks that Recovered from Financial Distress (Andrew P. Meyer) (22:40)
The Effect of Distance on Community Bank Performance Following Acquisitions and Reorganizations (Timothy J. Yeager) (20:43)
Performance of Community Banks in Good Times and Bad Times: Does Management Matter? (Dean F. Amel) (17:02)
Research Session 2 Question and Answer Period (21:41)

Supervision and Regulation of Community Banks
Moderator: Lamont Black (4:09)
Estimating Changes in Supervisory Standards and Their Economic Effects (William F. Bassett) (17:23)
The Impact of Dodd-Frank on Community Banks (Tanya D. Marsh) (15:39)
Capital Regulation at Community Banks: Lessons from 400 Failures (Robert R. Moore) (14:39)
A Failure to Communicate: The Pathology of Too Big to Fail (Harvey Rosenblum) (18:15)
Research Session 3 Moderator Wrap-up (14:43)
Audience Question and Answer Session (14:46)

Afternoon Keynote Presentation
Federal Reserve Governor Jerome Powell (28:27)

Panel Discussion and Presentation of Results from Town Hall Sessions
Presenter: Mike Stevens (13:20)

Panel Discussion: Community Banking in the 21st Century: Opportunities, Challenges and Perspectives
Moderator: Charles A. Vice (13:32)
Curt Hecker (7:38)
Bobby P. Martin (12:24)
Thomas E. Spitz (8:30)
Claire W. Tucker (9:14)
Community Banking Panel Question and Answer Period (1:04:29)
Julie Stackhouse, Closing Remarks (11:13)

Conference of State Bank Supervisor