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How bank competition affects firms' access to finance
 
Author:Love, Inessa; Peria, Maria Soledad Martinez; Collection Title:Policy Research working paper ; no. WPS 6163Paper is funded by the Knowledge for Change Program (KCP)
Country:World; Date Stored:2012/08/10
Document Date:2012/08/01Document Type:Policy Research Working Paper
SubTopics:Environmental Economics & Policies; Access to Finance; Economic Theory & Research; Banks & Banking Reform; Debt MarketsLanguage:English
Major Sector:FinanceRel. Proj ID:1W-The Crisis And Beyond: Fy11-Fy13 -- -- P122136;
Region:The World RegionReport Number:WPS6163
Sub Sectors:General finance sectorVolume No:1 of 1

Summary: 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.

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