How Bank Competition Affects Firms' Access to Finance

How Bank Competition Affects Firms' Access to Finance

Using multi-year, firm-level surveys for 53 countries, this paper explores the impact of bank competition on firms’ access to finance. We find that low competition, as measured by high values on the Lerner index or Boone indicator, diminishes firms’ access to finance. In addition, the impact of comp...

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Main Authors: Love, Inessa, Martínez Pería, María Soledad
Format: Journal Article
Language:en_US
Published: Published by Oxford University Press on behalf of the World Bank 2017
Subjects:
ACCESS TO FINANCE
BANK CONCENTRATION
BANK COMPETITION
MARKET POWER
Online Access:http://hdl.handle.net/10986/27683
id okr-10986-27683
recordtype oai_dc
spelling okr-10986-276832021-04-23T14:04:46Z How Bank Competition Affects Firms' Access to Finance Love, Inessa Martínez Pería, María Soledad ACCESS TO FINANCE BANK CONCENTRATION BANK COMPETITION MARKET POWER Using multi-year, firm-level surveys for 53 countries, this paper explores the impact of bank competition on firms’ access to finance. We find that low competition, as measured by high values on the Lerner index or Boone indicator, diminishes firms’ access to finance. In addition, the impact of competition on access to finance depends on the quality and scope of credit information sharing mechanisms, and better credit information mitigates the damaging impact of low competition. Overall, our paper offers consistent international evidence that supports the market power hypothesis, which argues that market power reduces access, and rejects the information hypothesis, which suggests that low competition improves access because it allows banks to internalize the investment in building firm-specific relationships. 2017-08-09T16:41:12Z 2017-08-09T16:41:12Z 2015-09-29 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/27683 en_US CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Published by Oxford University Press on behalf of the World Bank Publications & Research :: Journal Article Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language en_US
topic ACCESS TO FINANCE
BANK CONCENTRATION
BANK COMPETITION
MARKET POWER
spellingShingle ACCESS TO FINANCE
BANK CONCENTRATION
BANK COMPETITION
MARKET POWER
Love, Inessa
Martínez Pería, María Soledad
How Bank Competition Affects Firms' Access to Finance
description Using multi-year, firm-level surveys for 53 countries, this paper explores the impact of bank competition on firms’ access to finance. We find that low competition, as measured by high values on the Lerner index or Boone indicator, diminishes firms’ access to finance. In addition, the impact of competition on access to finance depends on the quality and scope of credit information sharing mechanisms, and better credit information mitigates the damaging impact of low competition. Overall, our paper offers consistent international evidence that supports the market power hypothesis, which argues that market power reduces access, and rejects the information hypothesis, which suggests that low competition improves access because it allows banks to internalize the investment in building firm-specific relationships.
format Journal Article
author Love, Inessa
Martínez Pería, María Soledad
author_facet Love, Inessa
Martínez Pería, María Soledad
author_sort Love, Inessa
title How Bank Competition Affects Firms' Access to Finance
title_short How Bank Competition Affects Firms' Access to Finance
title_full How Bank Competition Affects Firms' Access to Finance
title_fullStr How Bank Competition Affects Firms' Access to Finance
title_full_unstemmed How Bank Competition Affects Firms' Access to Finance
title_sort how bank competition affects firms' access to finance
publisher Published by Oxford University Press on behalf of the World Bank
publishDate 2017
url http://hdl.handle.net/10986/27683
_version_ 1764465882680000512

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