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Bank competition and firm creation

  • Emilia Bonaccorsi di Patti
  • Giovanni Dell'Ariccia

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.

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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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