Bank Concentration, Private Credit, and Firm Turnover Evidence from the Enlarged European Union

This study focuses on the role of credit constraints as important determinants of firm entry and exit. In particular, the relationship between the banking market structure and the turnover of firms in nonfinancial sectors is estimated for the period 2001-5 using industry-level data across a cross-section of EU-15 countries and new member states. Estimation results show that a higher degree of bank concentration is associated with lower firm turnover only in countries with a large banking sector (i.e., in EU-15 countries). This suggests that bank concentration in itself is not a barrier to firm turnover but has different net effects on different levels of financial, institutional, and economic development.