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Bank Competition and Firm Creation

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  • Bonaccorsi di Patti, Emilia
  • Dell'Ariccia, Giovanni

Abstract

We investigate the effects of competition in the financial sector on the creation of firms in the nonfinancial sector, explicitly allowing for heterogeneous effects across borrowers characterized by different degrees of asymmetric information. We find evidence of a bell-shaped relationship between bank competition and firm creation. In addition, consistently with theories arguing that competition may reduce the availability of credit to informationally opaque firms, we find that bank competition results less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important.

Suggested Citation

  • Bonaccorsi di Patti, Emilia & Dell'Ariccia, Giovanni, 2004. "Bank Competition and Firm Creation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 225-251, April.
  • Handle: RePEc:mcb:jmoncb:v:36:y:2004:i:2:p:225-51
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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