Bank Market Power and Access to Credit: Bank-Firm Level Evidence From the Euro Area

Pietro Grandi () and Caroline Ninou Bozou ()
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Pietro Grandi: Université Panthéon Assas (Paris II) and Boston College
Caroline Ninou Bozou: Université Panthéon Assas (Paris II) and OFCE-Sciences Po

Journal of Financial Services Research, 2023, vol. 63, issue 1, No 3, 63-90

Abstract: Abstract We test how bank market power affects firms’ access to credit using a bank-firm database on five European countries. Results indicate that firms served by high-market power banks obtain less credit, rely more on trade credit and face higher funding costs relative to other firms. Furthermore, the effect of bank market power is nonlinear and heterogeneous across firms. First, the effect of market power is larger for poorly collateralized firms. Second, market power is associated to worse credit conditions only beyond considerable levels of concentration. Overall, our findings suggest that concentration worsens corporate credit conditions, especially for informationally opaque firms.

Keywords: Bank competition; Access to finance; Market power; Credit constraints (search for similar items in EconPapers)
JEL-codes: G21 G32 L11 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10693-021-00373-w

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