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Bank Market Power and SME Financing Constraints

Santiago Carbó-Valverde, Francisco Rodríguez-Fernández and Gregory Udell ()
Authors registered in the RePEc Author Service: Francisco Rodríguez Fernández () and Santiago Carbo Valverde ()

Review of Finance, 2009, vol. 13, issue 2, 309-340

Abstract: Some studies find that market power is associated with credit availability (information hypothesis); others find that less competitive banking markets lead to more credit rationing (market power hypothesis). Empirical research has relied solely on concentration as a measure of market power. The industrial organization literature, however, argues that a structural competition indicator such as the Lerner index is a superior measure. We test the information hypothesis and the market power hypothesis using these two alternative measures of market power and find that they generally give conflicting results. However, we also offer evidence suggesting that both views can be reconciled. Copyright 2009, Oxford University Press.

Date: 2009
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Working Paper: Bank market power and SME financing constraints (2006)
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Handle: RePEc:oup:revfin:v:13:y:2009:i:2:p:309-340