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Bank competition and firm creation

  • Emilia Bonaccorsi Di Patti

    ()

    (Banca d'Italia)

  • Giovanni Dell'Ariccia

    (IMF, Research Department)

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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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2003/2003-0481/tema_481_03.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 481.

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Date of creation: Jun 2003
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Handle: RePEc:bdi:wptemi:td_481_03
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Web page: http://www.bancaditalia.it

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  13. 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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  16. Timothy H. Hannan, 1989. "Foundations of the structure-conduct-performance paradigm," Finance and Economics Discussion Series 83, Board of Governors of the Federal Reserve System (U.S.).
  17. Bonaccorsi di Patti, Emilia & Gobbi, Giorgio, 2001. "The changing structure of local credit markets: Are small businesses special?," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2209-2237, December.
  18. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," CRSP working papers 511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  19. Giovanni Dell'Ariccia & Ezra Friedman & Robert Marquez, 1999. "Adverse Selection as a Barrier to Entry in the Banking Industry," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 515-534, Autumn.
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  21. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  22. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-87, September.
  23. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
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