Who Wins and Who Loses from Bank Geographic Deregulation? Analysis of Financially Constrained and Unconstrained Firms

55 Pages Posted: 12 Jun 2018 Last revised: 29 Oct 2020

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Ruiyuan (Ryan) Chen

West Virginia University

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Date Written: March 5, 2019

Abstract

A key issue in the finance-growth nexus literature is endogeneity – economic growth may drive finance as well as finance driving growth. Some research addresses endogeneity using relatively exogenous shocks from U.S. bank geographic deregulation, often documenting favorable economic effects. We connect deregulation shocks for the first time to individual firm growth in a model that differentiates sources of external financing – short-term debt, long-term debt, and equity. Our results suggest that deregulation increases firm growth overall and this growth is fueled by all three external funding sources. However, benefits accrue only to relatively financially unconstrained firms, while relatively constrained firms lose.

Keywords: Bank Deregulation, Economic Growth, Financial Constraints, Large Firms, Small Firms

JEL Classification: G28, G32, D92

Suggested Citation

Berger, Allen N. and Chen, Ruiyuan and El Ghoul, Sadok and Guedhami, Omrane, Who Wins and Who Loses from Bank Geographic Deregulation? Analysis of Financially Constrained and Unconstrained Firms (March 5, 2019). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3185751 or http://dx.doi.org/10.2139/ssrn.3185751

Allen N. Berger

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Ruiyuan Chen

West Virginia University ( email )

1601 University Avenue
Morgantown, WV 26505
United States

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

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