Original scientific paper
https://doi.org/10.1080/1331677X.2021.2010109
The impact of banking competition on firm total factor productivity
Peisen Liu
Houjian Li
Abstract
The benefits of financial development to economic growth are
conspicuous, but due to the heterogeneity across regions and
firms, the effects of financial competition have not been fully
proved. There is a puzzling phenomenon in many developing
countries, that is, banking monopoly coexists with economic
growth. This study uses industrial enterprise data to analyse how
banking competition affects firm total factor productivity (T.F.P.)
and the influence of firm size and ownership in this process. The
results show that the competition in banking promotes firms to
improve their T.F.P., which is realised by alleviating financing constraints of firms through increasing banking competition and
aligns with the market power hypothesis. Moreover, banking competition enables small firms to improve their T.F.P. in regions with
fewer state-owned banks branches and more small banks
branches. Intensified competition in banking leads to an increase
in the T.F.P. of private firms, but it has no effect on the T.F.P. of
state-owned enterprises (S.O.E.s) and foreign firms. The expansion
of bank branches and the cross region operation of city commercial banks are helpful to improve firm T.F.P. This study confirms
the impact of competition caused by changes in bank branches
on firms and the determinants of productivity
Keywords
banking competition; total factor productivity (T.F.P.); state-owned banks; firm size; firm ownership
Hrčak ID:
302687
URI
Publication date:
31.3.2023.
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