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Financial Inclusion, Bank Concentration and Firm Performance

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  • L. Chauvet
  • L. Jacolin

Abstract

This study focuses on the impact of financial inclusion and bank concentration on the performance of firms in developing and emerging countries. Using firm-level data for a sample of 55,596 firms in 79 countries, we find that financial inclusion, i.e. the distribution of financial services across firms, has a positive impact on firm growth. This positive impact is magnified when bank markets are less concentrated, a proxy for more competition among banks. We also find that more competitive banks favor firm growth only at high levels of financial inclusion, while bank concentration is particularly favorable to foreign and state-owned firms, and increases firm growth for low levels of financial inclusion. In countries with limited financial deepening, the quality of the banking system (financial inclusion and bank competition) may be as important to promote firm performance as its overall size.

Suggested Citation

  • L. Chauvet & L. Jacolin, 2016. "Financial Inclusion, Bank Concentration and Firm Performance," Working papers 615, Banque de France.
  • Handle: RePEc:bfr:banfra:615
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:bfr:quarte:2017:47:05 is not listed on IDEAS
    2. Alphonse Noah & Luc Jacolin & Michael Brei, 2018. "Credit Risk And Bank Competition In Sub-Saharan Africa," EconomiX Working Papers 2018-27, University of Paris Nanterre, EconomiX.
    3. repec:bfr:quarte:2017:47:02 is not listed on IDEAS
    4. repec:bfr:bullbf:2017:212:02 is not listed on IDEAS
    5. repec:bfr:bullbf:2017:212:05 is not listed on IDEAS
    6. repec:bfr:quarte:2017:47:03 is not listed on IDEAS
    7. Jacolin, L. & Noah, A., 2017. "Le mouvement de déconcentration des systèmes bancaires en Afrique subsaharienne," Bulletin de la Banque de France, Banque de France, issue 212, pages 47-55.
    8. repec:bfr:bullbf:2017:212:03 is not listed on IDEAS
    9. L. Jacolin & A. Noah, 2017. "The deconcentration of banking systems in sub-Saharan Africa," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 47, pages 43-51, Autumn.
    10. repec:bfr:bullbf:2017:212:01 is not listed on IDEAS
    11. repec:bfr:quarte:2017:47:04 is not listed on IDEAS
    12. repec:bfr:bullbf:2017:212:04 is not listed on IDEAS
    13. repec:bfr:quarte:2017:47:01 is not listed on IDEAS

    More about this item

    Keywords

    Financial inclusion; Bank concentration; Firm performance;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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