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Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985

Author

Listed:
  • David Thesmar

    () (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • A. Schoar
  • Marianne Bertrand

Abstract

We investigate how the deregulation of the French banking industry in the 1980s affected the real behavior of firms and the structure and dynamics of product markets. Following deregulation, banks are less willing to bail out poorly performing firms and firms in the more bank-dependent sectors are more likely to undertake restructuring activities. At the industry level, we observe an increase in asset and job reallocation, an improvement in allocative efficiency across firms, and a decline in concentration. Overall, these findings support the view that a more efficient banking sector helps foster a Schumpeterian process of "creative destruction."

Suggested Citation

  • David Thesmar & A. Schoar & Marianne Bertrand, 2007. "Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985," Post-Print hal-00461082, HAL.
  • Handle: RePEc:hal:journl:hal-00461082
    DOI: 10.1162/JEEA.2007.5.4.709
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00461082
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    Keywords

    Banking Deregulation; Industry Structure; French; Banking Reforms; 1985;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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