Bank market power and firm creation: A multi-country analysis

Using a panel of countries this paper investigates the relationship between bank market power and firm creation, which represents a debated issue in the economic literature, still lacking empirical evidence. Employing alternative measures of bank market power and controlling for a set of determinants suggested by the variegate literature on firms’ birth determinants, we find that new business formation may benefit from highly competitive credit markets, as the relationship between new business registrations and bank market power – when statistically significant – appears to be negative. Hence, our evidence seems supporting the competitive position in the debate on the economic role of banking competition.