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Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets

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  • NICOLA CETORELLI
  • PHILIP E. STRAHAN

Abstract

This paper tests how competition in local U.S. banking markets affects the market structure of nonfinancial sectors. Theory offers competing hypotheses about how competition ought to influence firm entry and access to bank credit by mature firms. The empirical evidence, however, strongly supports the idea that in markets with concentrated banking, potential entrants face greater difficulty gaining access to credit than in markets in which banking is more competitive.

Suggested Citation

  • 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, February.
    • Handle: RePEc:bla:jfinan:v:61:y:2006:i:1:p:437-461
    DOI: 10.1111/j.1540-6261.2006.00841.x
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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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