Bank integration and financial constraints: evidence from U.S. firms
Abstract: This paper uses data on publicly-traded firms in the U.S. to analyze the effect of interstate bank integration on the financial constraints borrowers face. A firm-level investment equation is estimated in order to test if bank integration reduces the sensitivity of capital expenditures to the level of internal funds. The staggered deregulation of cross-state bank acquisitions that took place in the U.S. between 1978 and 1994 helps estimate the model. Integration decreases financing constraints for bank-dependent firms. The change in firms' access to external finance is explained by an increase in the share of locally headquartered geographically diversified banks.
File(s): File format is text/html http://www.federalreserve.gov/pubs/ifdp/2008/925/default.htm
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Part of Series: International Finance Discussion Papers
Publication Date: 2008