Bank market power and firm creation: a multi-country analysis
Journal of Small Business and Enterprise Development
ISSN: 1462-6004
Article publication date: 16 May 2016
Abstract
Purpose
The purpose of this paper is to investigate the relationship between bank market power and firm creation, which represents a debated issue in the economic literature, still lacking empirical evidence.
Design/methodology/approach
The analysis is carried out by taking an international perspective, using different measures of banking competition, and controlling for a large set of determinants suggested by the variegate literature on firms’ birth drivers.
Findings
The main finding suggests that credit market competition may benefit firms’ creation, as the relationship between the latter and bank market power – when statistically significant – appears to be negative. In addition, the detrimental impact of market power appears greater (in absolute terms) when departing from higher levels of banking competition.
Research limitations/implications
The empirical evidence seems supporting the competitive position in the debate on the role of banking competition. Furthermore, the authors reckon that the findings reinforce the belief of a crucial role played by the availability of funds for nascent firms, with evident implications for the policy strategies more appropriate to foster entrepreneurship. The “fashion” followed by several countries of lowering administrative entry barriers (van Stel et al., 2007) needs to be reappraised, pondering also means to enrich resources availability.
Originality/value
To the best of the knowledge, the paper is the first one addressing the issue of the role of bank market structure on firms’ creation in a multi-country setting.
Keywords
Citation
Agostino, M. and Trivieri, F. (2016), "Bank market power and firm creation: a multi-country analysis", Journal of Small Business and Enterprise Development, Vol. 23 No. 2, pp. 562-589. https://doi.org/10.1108/JSBED-02-2014-0027
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited