Entrepreneurship and its job creation capacity play an important social function and this study analyzes how the health of a regional banking industry affects these regional business dynamics. Using a panel dataset covering all 50 states and Washington, DC for the period 1977-2014, several key outcome variables were estimated using a fixed effects and instrumental variable regressions. These included net business formation, net job creation, net job creation among continuers, the job creation rate, and employment growth. These were explained by banking variables like return-on-assets and capital-to-assets as well as regional macroeconomic variables like real personal income and housing price index growth. The findings reflect that a greater bank profitability and hence a healthier regional banking industry is conducive to promoting regional business formation. Moreover, state-level real personal income growth and growth in housing price index are beneficial for promoting regional businesses. This has implications in gaining knowledge on how regional economies are affected by the relationship between banking and entrepreneurship.
Filbert, Rowland, "Implications of Regional Banking Industry on Regional Business Dynamics" (2018). Mark A. Israel '91 Endowed Summer Research Fund in Economics. 6.