Bank Competition and Firm Creation
February 1, 2001
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Summary
This paper investigates the empirical relationship between competition in the financial sector and the creation of firms in the non-financial sector. It finds that bank competition has an overall positive effect on firm creation. However, consistent with theories of banking arguing that competition may reduce the availability of credit to informationally opaque firms, it also finds that asymmetric information limits the overall positive effect of bank competition on firm creation. Indeed, bank competition is less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important, and in extreme cases has a negative effect.
Subject: Bank credit, Banking, Commercial banks, Competition, Credit, Financial institutions, Financial markets, Financial sector policy and analysis, Money, Moral hazard
Keywords: bank competition, Bank credit, banking industry, birth of firm, birth rate, Commercial banks, company balance sheets, Competition, Credit, Moral hazard, registered firm, WP
Pages:
39
Volume:
2001
DOI:
Issue:
021
Series:
Working Paper No. 2001/021
Stock No:
WPIEA0212001
ISBN:
9781451843910
ISSN:
1018-5941
