How Bank Competition Affects Firms’ Access to Finance

38 Pages Posted: 11 Sep 2012 Last revised: 22 Jan 2013

See all articles by Inessa Love

Inessa Love

University of Hawaii

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Date Written: September 11, 2012


Combining multi-year, firm-level surveys with country-level panel data for 53 countries, this paper explores the impact of bank competition on firms’ access to finance. We 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, the impact of competition on access to finance depends on the environment that banks operate in: greater financial development and better credit information can mitigate the damaging impact of low competition, while high government bank ownership exacerbates the negative effect.

Keywords: bank competition, bank concentration, access to finance

JEL Classification: G20, L1

Suggested Citation

Love, Inessa and Martinez Peria, Maria Soledad, How Bank Competition Affects Firms’ Access to Finance (September 11, 2012). Midwest Finance Association 2013 Annual Meeting Paper. Available at SSRN: or

Inessa Love

University of Hawaii ( email )

Honolulu, HI
United States

Maria Soledad Martinez Peria (Contact Author)

International Monetary Fund (IMF) ( email )

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

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