Bank Competition and Firm Growth in the Enlarged European Union

Posted by D. Daniel Sokol

Gábor Pellényi (research fellow, ICEG European Center) and Tamás Borkó (research fellow, ICEG European Center) examine Bank Competition and Firm Growth in the Enlarged European Union.

ABSTRACT:We examine the impact of bank competition and institutional factors on net firm entry in a sample of European manufacturing industries over the 1995-2006 period. Taking into account industry differences in the need for external finance, we find that bank competition helps firm entry. In addition, better institutions - especially legal structure and property rights - also have a positive impact, particularly through a better functioning financial system.