How Bank Competition Affects Firms' Access to Finance

By Inessa Love, María Soledad Martínez Pería. 2012

334 citations recorded by the source corpus.

Combining multi-year, firm-level surveys with country-level panel data for 53 countries, the authors explore the impact of bank competition on firms' access to finance. They 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, they find that the impact of competition on access to finance depends on the environment that banks operate in. Some features of the environment, such as greater financial development and better credit information, can mitigate the damaging impact of low competition. But other characteristics, such as high government bank ownership, can exacerbate the negative effect.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/99a994064992f85dc585ea0d0d53811d11b95eca

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Citations in the corpus

Is financial inclusion good for bank stability? International evidence (2017, background): “…et al. (2000); Klapper et al. (2006); Demirgüç-Kunt et al. (2008); DemirgüçKunt et al. (2015); Burgess and Pande (2005), and Banerjee et al. (2013), in India; Bruhn and Love (2009), and Bruhn and Love (2014), in Mexico; Karlan and Zinman (2010), in South Africa; Dupas and Robinson (2009), in Kenya.”
Does bank competition reduce cost of credit? Cross-country evidence from Europe (2017, positive): “…at the aggregate level, which explains the common use of aggregate measures of bank competition in cross-country studies on the impact of bank competition (e.g. Beck, Demirgüc-Kunt, and Levine, 2004; Love and Peria, 2012; Hainz, Weill, and Godlewski, 2013; and Ryan, O’Toole, and McCann, 2014).”