WU Han, DUAN Wenbin:Banking Market Structure, Financial Dependence and Firm Entry——Empirical Research from the Perspective of Optimal Financial Structure Theory

Abstract：Based on the perspective of Optimal Financial Structure, this paper explores the impact of banking market structure on firm entry by constructing the theoretical and empirical models.At first, this paper constructs a theoretical model about the microeconomic mechanism of how the banking market structure affects firm entry, drawing a conclusion that improving the market share of small and medium-sized banks can effectively relief the financial constraints when they enter the market.Then, this paper processes different-sized firms' entry data across 30 provinces and 24 industries in China from industrial enterprises database(2005-2009) and uses Two-way FE Model to conduct empirical research, testing the theoretical conclusions.It shows that the development of small and medium-sized banks promotes the entry of SMEs, and has no significant effect on the entry of large-sized firms; but the expansion of banking sector promotes the entry of large size enterprises, and has no significant effect on the entry of SMEs.The policy implication is that, compared with enlarging the scale of the banking sector, the development of small and medium-sized banks and business system reform of state-owned banks should be an important content of the policy of promoting small and medium-sized enterprises to enter the market.

Key words： Banking Market Structure    Small and Medium-sized Banks    Firm entry    Financial Dependence

source:Finance & Trade Economics ,No.5,2015