Exploring the nexus between bank market power and exports |
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| Institution: | 1. CNRS, IÉSEG School of Management, Univ. Lille, UMR 9221 - LEM, 3 Rue de la Digue, F-59000, Lille, France;2. University of Illinois at Chicago, IÉSEG School of Management, 757 Sphpi, M/c 923, 1603 W. Taylor St, Chicago, IL 60612, USA;3. IÉSEG School of Management, Univ. Lille, UMR 9221 - LEM, 3 Rue de la Digue, F-59000, Lille, France;1. WHU - Otto Beisheim School of Management, Burgplatz 2, 56179, Vallendar, Germany;2. EBS Business School, Burgstraße 5, 65375, Oestrich-Winkel, Germany;1. Salford Business School, University of Salford, Salford, M5 4WT, UK;2. University of Liverpool Management School, University of Liverpool, Chatham Street, Liverpool, L69 7ZH, UK;3. Department of Economics, University of Oviedo, Facultad de Comercio, Turismo y Ciencias Sociales Jovellanos, Luis Moya Blanco, 261. 33203 Gijón, Spain |
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| Abstract: | Although the literature underlines the importance of finance in international trade, no prior study has examined the causal links between market power in banking and export performance. Using a world sample over the 1997-2010 period, and accounting for both observed and unobserved country heterogeneity, we find a positive effect of bank market power on exports, especially in high-income countries. We also document that this export-enhancing effect is more potent in informationally opaque markets. Our findings accord with information hypothesis which suggests that market power in banking induces stronger bank-firm relationships which can generate benefits for both borrowers and lenders. Policy interventions should, therefore, promote the supply of relationship lending as a means to mitigate informational asymmetries in the export market. |
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| Keywords: | Exports Bank market power Information asymmetries World sample F14 G21 D40 |
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