Bank Competition and Firm Creation

43 Pages Posted: 6 Feb 2001

See all articles by Emilia Bonaccorsi di Patti

Emilia Bonaccorsi di Patti

Bank of Italy

Giovanni Dell'Ariccia

International Monetary Fund (IMF) - Research Department; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 5, 2001

Abstract

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, consistently 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 results 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.

Keywords: Banking competition, asymmetric information, growth

JEL Classification: E51, G21

Suggested Citation

Bonaccorsi di Patti, Emilia and Dell'Ariccia, Giovanni, Bank Competition and Firm Creation (February 5, 2001). Available at SSRN: https://ssrn.com/abstract=258811 or http://dx.doi.org/10.2139/ssrn.258811

Emilia Bonaccorsi di Patti

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Giovanni Dell'Ariccia (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8135 (Phone)
202-623-4352 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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