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How Bank Competition Affects Firms'Access to Finance

36 Pages Posted: 20 Apr 2016  

Inessa Love

World Bank - Development Economics Data Group (DECDG)

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Date Written: August 1, 2012

Abstract

Combining multi-year, firm-level surveys with country-level panel data for 53 countries, the authors explore the impact of bank competition on firms' access to finance. They find that low competition, as measured by high values of the Lerner index, diminishes firms' access to finance, while commonly-used bank concentration measures are not robust predictors of firms' access to finance. In addition, they find that the impact of competition on access to finance depends on the environment that banks operate in. Some features of the environment, such as greater financial development and better credit information, can mitigate the damaging impact of low competition. But other characteristics, such as high government bank ownership, can exacerbate the negative effect.

Keywords: Access to Finance, Banks & Banking Reform, Debt Markets, Economic Theory & Research, Environmental Economics & Policies

Suggested Citation

Love, Inessa and Martinez Peria, Maria Soledad, How Bank Competition Affects Firms'Access to Finance (August 1, 2012). World Bank Policy Research Working Paper No. 6163. Available at SSRN: https://ssrn.com/abstract=2127999

Inessa Love (Contact Author)

World Bank - Development Economics Data Group (DECDG) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/ilove

Maria Soledad Martinez Peria

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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