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RESEARCH PRODUCT

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

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Fernandez de Guevara J. and Maudos J. Regional financial development and bank competition: effects on firms' growth, Regional Studies. This paper analyses the effect of regional financial development and bank competition on firms' growth using the Spanish provinces as a testing ground. The 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 to which they belong. 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. Fernandez de Guevara J. et Maudos J. Le developpement financier regional et la concurrence bancaire: l'imp...