Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data
This paper explores the empirical relevance of banking market structure on
growth. There is substantial evidence of a positive relationship between the level of
development of the banking sector of an economy and its long-run output growth.
Little is known, however, about the role played by the market structure of the
banking sector on the dynamics of capital accumulation. This paper provides
evidence that bank concentration promotes the growth of those industrial sectors
that are more in need of external finance by facilitating credit access to younger
firms. However, we also find evidence of a general depressing effect on growth
associated with a concentrated banking industry, which impacts all sectors and all
firms indiscriminately.