Working Paper: NBER ID: w10832
Authors: Nicola Cetorelli; Philip E. Strahan
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.
Keywords: bank competition; industry structure; credit access; barriers to entry
JEL Codes: G2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased banking competition (G21) | Greater number of firms operating in local markets (L19) |
| Decrease in bank concentration (F65) | Increase in number of establishments (L26) |
| Decrease in bank concentration (F65) | Decrease in average size of establishments (L25) |
| Changes in banking competition (F65) | No significant effect on largest firms (L25) |
| Deregulation in interstate banking (G28) | Increase in share of smaller establishments (L25) |