Netting, Financial Contracts, and Banks: The Economic Implications
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.