Bank competition and corporate financialization: evidence from China

Abstract

By integrating the banks and firms’ latitude and longitude information, this study innovatively constructs firm-level bank competition indicators, and systematically examines the mechanism of bank competition on the financialization of nonfinancial listed companies. The findings revealed that bank competition could promote corporate financialization. The result is still valid after several robustness tests and consideration of endogenous issues. Bank competition primarily affects corporate financialization through two channels: easing corporate financial constraints and decreasing corporate loan costs. Moreover, this role is even more apparent in non-state-owned firms and well-managed firms.

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