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Bank competition and firm creation

  • Emilia Bonaccorsi di Patti
  • Giovanni Dell'Ariccia

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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Paper provided by Federal Reserve Bank of Chicago in its series Proceedings with number 680.

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Length: 132-161
Date of creation: 2000
Date of revision:
Publication status: Published in Conference on Bank Structure and Competition (2000 : 36th) ; The changing financial industry structure and regulation : bridging states, countries, and industries
Handle: RePEc:fip:fedhpr:680
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