Bank Competition and Firm Creation

Author/Editor:

Giovanni Dell'Ariccia

Publication Date:

February 1, 2001

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper investigates the empirical relationship between competition in the financial sector and the creation of firms in the non-financial sector. It finds that bank competition has an overall positive effect on firm creation. However, consistent with theories of banking arguing that competition may reduce the availability of credit to informationally opaque firms, it also finds that asymmetric information limits the overall positive effect of bank competition on firm creation. Indeed, bank competition is less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important, and in extreme cases has a negative effect.

Series:

Working Paper No. 2001/021

Subject:

Bank credit Banking Commercial banks Competition Credit Financial institutions Financial markets Financial sector policy and analysis Money Moral hazard

English

Publication Date:

February 1, 2001

ISBN/ISSN:

9781451843910/1018-5941

Stock No:

WPIEA0212001

Pages:

39

Please address any questions about this title to publications@imf.org