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Regional financial development and bank competition: effects on firms' growth

[journal article]

Maudos, Joaquin; Fernandez de Guevara, Juan

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Abstract This paper analyzes the effect of regional financial development and bank competition on firms' growth using the Spanish provinces as a testing ground. Our results show that firms in industries with a greater dependence on external finance grow faster in more financially developed provinces. The results also show that bank monopoly power has an inverted-U effect on firms' growth, suggesting that market power has its highest effect at intermediate values. The effect is heterogeneous among firms according to the financial dependence of the industry they belong to. This result is consistent with the literature on relationship banking which argues that bank competition can have a negative effect on the availability of finance for more informationally opaque firms.
Classification Public Finance; Area Development Planning, Regional Research
Free Keywords Economic growth; Regional financial development; Bank competition
Document language English
Publication Year 2009
Page/Pages p. 211-228
Journal Regional Studies, 43 (2009) 2
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)