Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets
Abstract
This paper tests how competition in local U.S. banking markets affects the market structure of nonfinancial 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 in which banking is more competitive.
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Financial sector reforms that improve banking system functioning boost new business creation in industries that depend heavily on finance.
“They show that financial sector reforms that improve the functioning of banking systems boost new business creation in industries that depend heavily on finance.”
From Finance, Growth, and Inequality (2021) · cites this paper as Cetorelli and Strahan (2006)
Cites
Bank competition and firm creation
Bonaccorsi di Patti, E., & Dell'Ariccia, G. (2004) · Journal of Money, Credit, and Banking · doi:10.1353/mcb.2004.0011 · Cited by 399 · see citing works
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The political economy of financial development
Girma, S., & Shortland, A. (2007) · Oxford Economic Papers · doi:10.1093/oep/gpm040 · Cited by 203 · see citing works
Finance, Growth, and Inequality
Levine, R. (2021) · IMF Working Papers · doi:10.5089/9781513583365.001 · Cited by 62 · see citing works
- Authors
- CETORELLI, N., & STRAHAN, P. E.
- Affiliations
- Wesleyan University (US)
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2006-01-20
- Volume
- 61
- Issue
- 1
- Pages
- 437-461
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W3124451138
- Cited by
- 920
- References
- 1
- Citations by year
- 2026: 34 · 2025: 38 · 2024: 54 · 2023: 76 · 2022: 46 · 2021: 65 · 2020: 45 · 2019: 54 · 2018: 47 · 2017: 39 · 2016: 48 · 2015: 44 · 2014: 48 · 2013: 46 · 2012: 35
- FWCI
- 66.35
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Journal of Finance (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Firm Innovation and Growth
- Keywords
- bank competition, market concentration, firm entry, access to credit, non-financial firms, banking market, industry structure, local markets, barriers to entry
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