Financial Integration and Growth: Banks' Previous Industry Exposure Matters

Neslihan Dincbas, Tomasz Michalski and Evren Ors ()
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Neslihan Dincbas: HEC Paris, Postal: 1 rue de la Libération, 78350 Jouy-en-Josas

No 1096, HEC Research Papers Series from HEC Paris

Abstract: We examine whether industry structure of an economy can be affected by its banks’ lending policies. We use US interstate bank-entry deregulations to identify the effect of banking integration on states’ manufacturing sector compositions. We find that states’ under-specialized (with respect to the US) and external-finance-dependent industries grow faster upon entry of banks from states that are overspecialized in the same sectors. We observe growth for industry value added, gross operating surplus, and output per employee, but none for the number of employees, their compensation or wages. Our results are indicative of a banking channel shaping the states’ industrial landscape.

Keywords: banking integration; industry structure; industrial specialization; economic convergence (search for similar items in EconPapers)
JEL-codes: F15 G21 G28 R12 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2015-06-26
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Related works:
Working Paper: Financial Integration and Growth: Banks' Previous Industry Exposure Matters (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1096

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