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Who's afraid of big bad banks? Bank competition, SME, and industry growth

Robert Inklaar, Michael Koetter and Felix Noth

No 197, Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management

Abstract: We test how bank market power influences technical change and resource allocation of informationally opaque firms. We use a dataset with approximately 700,000 firm-year observations of German small and medium-sized enterprises (SME) to identify the effect of bank market power using the dependence on external finance per industry and the regional demarcation of the German banking market. Market power generally spurs aggregate SME growth. Banks need to realize sufficient margins to generate useful private information. Bank market power spurs both technical change and reallocation of resources, but it reduces SME growth in industries that depend heavily on external finance.

Keywords: growth decomposition; reallocation; banking; market power (search for similar items in EconPapers)
JEL-codes: E22 G21 O16 O41 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ban, nep-com, nep-cse, nep-ent, nep-ind and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fsfmwp:197

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