Does bank competition alleviate credit constraints in developing countries?

Whether competition helps or hinders firms’ access to finance, particularly in the developing world, is in itself a much debated question in the economic literature and in policy circles. This paper considers the consequences of bank competition on credit constraints using firm level data covering 6...

Full description

Saved in:
Bibliographic Details
Published in:Journal of banking & finance 2015-08, Vol.57, p.130-142
Main Author: Leon, Florian
Format: Article
Language:English
Subjects:
Banking competition
Banks
Competition
Competition between banks
Corporate finance
Credit constraints
Credit control
Developing countries
Discouraged borrowers
LDCs
Quantitative Finance
Risk assessment
Risk management
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Whether competition helps or hinders firms’ access to finance, particularly in the developing world, is in itself a much debated question in the economic literature and in policy circles. This paper considers the consequences of bank competition on credit constraints using firm level data covering 69 developing and emerging countries. In addition to the classical concentration measure, competition is assessed by computing three non-structural measures (Boone indicator, Lerner index and H-statistic). The results show that bank competition alleviates credit constraints and that bank concentration measure is not a robust predictor of a firm’s access to finance. The study highlights that bank competition not only leads to less severe loan approval decisions but also reduces borrower discouragement.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2015.04.005