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Life-cycle dynamics in industrial sectors. The role of banking market structure

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  • Nicola Cetorelli

Abstract

This paper analyzes the role of bank competition on the life-cycle dynamics of non-financial industries. Using multi-dimensional data sets, which contain information on job creation and destruction for establishments in U.S. manufacturing sectors operating in different geographical regions and over time, I find evidence that bank competition accelerates the expansion of start-ups and helps them to thrive while young. Once these establishments are mature, however, less competitive banking markets are more propitious. Specifically, mature establishments expand at higher rates and exit the industry at a slower pace in less competitive banking markets.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-02-26.

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Date of creation: 2002
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Handle: RePEc:fip:fedhwp:wp-02-26

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Keywords: Bank competition ; Banking market ; Manufactures;

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References

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  1. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
  2. Sandra E. Black & Philip E. Strahan, 2002. "Entrepreneurship and Bank Credit Availability," Journal of Finance, American Finance Association, vol. 57(6), pages 2807-2833, December.
  3. Cestone, Giacinta & White, Lucy, 2002. "Anti-Competitive Financial Contracting: The Design of Financial Claims," CEPR Discussion Papers 3182, C.E.P.R. Discussion Papers.
  4. Nicola Cetorelli, 2002. "Does bank concentration lead to concentration in industrial sectors?," Proceedings 818, Federal Reserve Bank of Chicago.
  5. Chevalier, Judith A, 1995. "Capital Structure and Product-Market Competition: Empirical Evidence from the Supermarket Industry," American Economic Review, American Economic Association, vol. 85(3), pages 415-35, June.
  6. Giovanni Dell'Ariccia, 2001. "Bank Competition and Firm Creation," IMF Working Papers 01/21, International Monetary Fund.
  7. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  8. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
  9. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
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Citations

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Cited by:
  1. Nicola Cetorelli & Philip E. Strahan, 2006. "Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets," Journal of Finance, American Finance Association, vol. 61(1), pages 437-461, 02.
  2. Degryse, H.A. & Ongena, S., 2006. "The Impact of Competition on Bank Orientation," Discussion Paper 2006-68, Tilburg University, Center for Economic Research.
  3. Raghuram G. Rajan, 2003. "Commentary on Life-cycle dynamics in industrial sectors: the role of banking market structure," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 149-150.
  4. Pietro ALESSANDRINI & Luca PAPI & Alberto ZAZZARO, 2002. "Banche, territorio e sviluppo," Working Papers 175, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  5. Allen Berger & Iftekhar Hasan & Leora Klapper, 2004. "Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance," Journal of Financial Services Research, Springer, vol. 25(2), pages 169-202, April.
  6. Hans Degryse & Steven Ongena, 2004. "The Impact of Competition on Bank Orientation and Specialization (new titel: The impact of competition on bank orientation)," CESifo Working Paper Series 1119, CESifo Group Munich.
  7. Beck, T.H.L. & Demirgüç-Kunt, A. & Maksimovic, V., 2004. "Bank competition and access to finance," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125507, Tilburg University.
  8. Pietro Alessandrini & Luca Papi & Alberto Zazzaro, 2003. "Banks, regions and development," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 56(224), pages 23-55.
  9. Mariarosaria Agostino & Francesco Trivieri, 2010. "Is banking competition beneficial to SMEs? An empirical study based on Italian data," Small Business Economics, Springer, vol. 35(3), pages 335-355, October.
  10. Nadine Leiner-Killinger & Víctor López Pérez & Roger Stiegert & Giovanni Vitale, 2007. "Structural reforms in EMU and the role of monetary policy – a survey of the literature," Occasional Paper Series 66, European Central Bank.
  11. Martin Cihák & Simon Wolfe & Klaus Schaeck, 2006. "Are More Competitive Banking Systems More Stable?," IMF Working Papers 06/143, International Monetary Fund.
  12. Anzoategui, Diego & Pería, María Soledad Martínez & Melecky, Martin, 2012. "Bank competition in Russia: An examination at different levels of aggregation," Emerging Markets Review, Elsevier, vol. 13(1), pages 42-57.
  13. Randall S. Kroszner & Philip E. Strahan, 2013. "Regulation and Deregulation of the U.S. Banking Industry: Causes, Consequences and Implications for the Future," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 485-543 National Bureau of Economic Research, Inc.

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