Bank Competition and Firm Creation

Emilia Bonaccorsi di Patti and Giovanni Dell'ariccia ()

Journal of Money, Credit and Banking, 2004, vol. 36, issue 2, pages 225-51

Abstract: 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.

Date: 2004
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Persistent link: http://EconPapers.repec.org/RePEc:mcb:jmoncb:v:36:y:2004:i:2:p:225-51

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