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Financial inclusion, bank concentration, and firm performance

Author

Listed:
  • Lisa Chauvet

    (Institut de Recherche pour le Développement (IRD), DIAL - Développement, institutions et analyses de long terme)

  • Luc Jacolin

    (Banque de France - Banque de France)

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 at 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 in promoting firm performance as its overall size.

Suggested Citation

  • Lisa Chauvet & Luc Jacolin, 2017. "Financial inclusion, bank concentration, and firm performance," Post-Print hal-02277478, HAL.
    • Handle: RePEc:hal:journl:hal-02277478
    DOI: 10.1016/j.worlddev.2017.03.018
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    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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