Abstract

We investigate the effects of competition in the financial sector on the creation of firms in the nonfinancial sector, explicitly allowing for heterogeneous effects across borrowers characterized by different degrees of asymmetric information. We find evidence of a bell-shaped relationship between bank competition and firm creation. In addition, consistently with theories arguing that competition may reduce the availability of credit to informationally opaque firms, we find that bank competition results less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important.

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Additional Information

ISSN
1538-4616
Print ISSN
0022-2879
Pages
pp. 225-251
Launched on MUSE
2004-03-26
Open Access
No
Archive Status
Archived 2007
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