Who Wins and Who Loses From Bank Geographic Deregulation? Analysis of Financially Constrained and Unconstrained Firms
55 Pages Posted: 12 Jun 2018 Last revised: 6 Mar 2019
Date Written: March 5, 2019
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 this issue using relatively exogenous bank geographic deregulation by U.S. states, usually finding that deregulation has favorable economic effects. We explore a channel behind this connection, namely, how deregulation influences economic growth, by examining the link between deregulation and individual firm growth. Our evidence suggests that deregulation is associated with greater access to external financing to fund firm growth for relatively financially unconstrained firms, but financially constrained firms suffer reduced access, raising significant policy concerns.
Keywords: Bank Deregulation, Economic Growth, Financial Constraints, Large Firms, Small Firms
JEL Classification: G28, G32, D92
Suggested Citation: Suggested Citation