Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets

42 Pages Posted: 29 Oct 2004 Last revised: 8 Aug 2010

See all articles by Nicola Cetorelli

Nicola Cetorelli

Federal Reserve Bank of New York

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

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Date Written: October 2004

Abstract

This paper tests how competition in local U.S. banking markets affects the market structure of non-financial sectors. Theory offers competing hypotheses about how competition ought to influence firm entry and access to bank credit by mature firms. The empirical evidence, however, strongly supports the idea that in markets with concentrated banking, potential entrants face greater difficulty gaining access to credit than in markets where banking is more competitive.

Suggested Citation

Cetorelli, Nicola and Strahan, Philip E., Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets (October 2004). NBER Working Paper No. w10832, Available at SSRN: https://ssrn.com/abstract=603652

Nicola Cetorelli

Federal Reserve Bank of New York ( email )

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HOME PAGE: http://nyfedeconomists.org/cetorelli/

Philip E. Strahan (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
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