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Banking competition, financial dependence and economic growth

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Author Info
Maudos, Joaquin
Fernandez de Guevara, Juan

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Abstract

The aim of this paper is to analyse the effect of financial development and banking competition on economic growth using both structural measures of competition (market concentration) and measures based on the new empirical industrial organization perspective (Panzar and Rosse`s test and the Lerner index). The evidence obtained in the period 1993-2003 for a sample of 53 sectors in 21 countries indicates that financial development and the exercise of bank market power promote economic growth. The latter result is consistent with the literature on relationship lending which argues that bank competition can have a negative effect on the availability of finance for companies that are informationally more opaque. The results cast doubt on the use of market concentration measures as indicators of competition.

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File URL: http://mpra.ub.uni-muenchen.de/15254/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15254.

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Date of creation: 2006
Date of revision: 2006
Handle: RePEc:pra:mprapa:15254

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Related research
Keywords: economic growth; financial development; bank competition;

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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
D40 - Microeconomics - - Market Structure and Pricing - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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  1. D'Auria, Claudio & Foglia, Antonella & Reedtz, Paolo Marullo, 1999. "Bank interest rates and credit relationships in Italy," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 1067-1093, July. [Downloadable!] (restricted)
  2. Cole, Rebel A., 1998. "The importance of relationships to the availability of credit," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 959-977, August. [Downloadable!] (restricted)
  3. Chakraborty, Atreya & Hu, Charles X., 2006. "Lending relationships in line-of-credit and nonline-of-credit loans: Evidence from collateral use in small business," Journal of Financial Intermediation, Elsevier, vol. 15(1), pages 86-107, January. [Downloadable!] (restricted)
  4. Santiago Carbó-Valverde & Francisco Rodriguez-Fernandez & Gregory F. Udell, 2006. "Bank market power and SME financing constraints," Proceedings, Federal Reserve Bank of Chicago, pages 143-163. [Downloadable!]
    Other versions:
  5. Berger, Allen N, et al, 2004. "Bank Concentration and Competition: An Evolution in the Making," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 433-51, June.
  6. Luigi Guiso & Tullio Jappelli & Mario Padula & Marco Pagano, 2004. "Financial Market Integration and Economic Growth in the EU," CSEF Working Papers 118, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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  7. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300. [Downloadable!] (restricted)
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  8. Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April. [Downloadable!] (restricted)
  9. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January. [Downloadable!] (restricted)
  10. Angelini, P. & Di Salvo, R. & Ferri, G., 1998. "Availability and cost of credit for small businesses: Customer relationships and credit cooperatives," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 925-954, August. [Downloadable!] (restricted)
  11. Berlin, Mitchell & Mester, Loretta J, 1999. "Deposits and Relationship Lending," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 12(3), pages 579-607.
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  12. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
  13. Carbo, Santiago & Humphrey, David & Maudos, Joaquin & Molyneux, Philip, 2006. "Cross-Country Comparisons of Competition and Pricing Power in European Banking," MPRA Paper 15258, University Library of Munich, Germany, revised 2006. [Downloadable!]
    Other versions:
  14. Juan Fernández De Guevara & Joaquín Maudos, 2004. "Measuring welfare loss of market power: an application to European banks," Applied Economics Letters, Taylor and Francis Journals, vol. 11(13), pages 833-836, October. [Downloadable!] (restricted)
  15. Degryse, Hans & Van Cayseele, Patrick, 2000. "Relationship Lending within a Bank-Based System: Evidence from European Small Business Data," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 90-109, January. [Downloadable!] (restricted)
    Other versions:
  16. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September. [Downloadable!] (restricted)
    Other versions:
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