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Bank competition and firm creation

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  • Emilia Bonaccorsi di Patti
  • Giovanni Dell'Ariccia

Abstract

We investigate the effects of competition in the banking sector on the creation of firms in the non-financial sector, explicitly allowing for heterogeneous effects across borrowers characterized by different degrees of asymmetric information. We find evidence of a bellshaped relationship between bank competition and firm creation. In addition, consistent with models finding that competition may reduce the availability of credit to informationally opaque firms, we find that bank competition is less favorable to the emergence of new firms in industries where information asymmetries are greater.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Proceedings with number 680.

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Length: 132-161
Date of creation: 2000
Date of revision:
Publication status: Published in Conference on Bank Structure and Competition (2000 : 36th) ; The changing financial industry structure and regulation : bridging states, countries, and industries
Handle: RePEc:fip:fedhpr:680

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Keywords: Bank competition ; Banks and banking ; Banking market;

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References

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  15. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  16. Jackson, John E. & Thomas, Ann R., 1995. "Bank structure and new business creation lessons from an earlier time," Regional Science and Urban Economics, Elsevier, vol. 25(3), pages 323-353, June.
  17. Robert DeYoung & Lawrence G. Goldberg & Lawrence J. White, 1997. "Youth, Adolescence, and Maturity of Banks: Credit Availability to Small Business in an Era of Banking Consolidation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-025, New York University, Leonard N. Stern School of Business-.
  18. Besanko, David & Thakor, Anjan V., 1992. "Banking deregulation: Allocational consequences of relaxing entry barriers," Journal of Banking & Finance, Elsevier, vol. 16(5), pages 909-932, September.
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  21. Michael H. Riordan, 1992. "Competition and Bank Performance: A Theoretical Perspective," Papers 0026, Boston University - Industry Studies Programme.
  22. Hoff, Karla & Stiglitz, Joseph E., 1997. "Moneylenders and bankers: price-increasing subsidies in a monopolistically competitive market," Journal of Development Economics, Elsevier, vol. 52(2), pages 429-462, April.
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