How Bank Competition Affects Firms’ Access to Finance
38 Pages Posted: 11 Sep 2012 Last revised: 22 Jan 2013
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
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