The Journal of Finance

Banking Globalization and Monetary Transmission

Published: 09/12/2012   |   DOI: 10.1111/j.1540-6261.2012.01773.x

NICOLA CETORELLI, LINDA S. GOLDBERG

Globalization of banking raises questions about banks’ liquidity management, their response to liquidity shocks, and the potential for international shock propagation. We conjecture that global banks manage liquidity on a global scale, actively using cross‐border internal funding in response to local shocks. Having global operations insulates banks from changes in monetary policy, while banks without global operations are more affected by monetary policy than previously found. We provide direct evidence that internal capital markets are active in global banks and contribute to the international propagation of shocks. This feature was at play during the financial crisis of 2007–2009.

Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00339

Nicola Cetorelli, Michele Gambera

This paper explores the empirical relevance of banking market structure on growth. There is substantial evidence of a positive relationship between the level of development of the banking sector of an economy and its long‐run output growth. Little is known, however, about the role played by the market structure of the banking sector on the dynamics of capital accumulation. This paper provides evidence that bank concentration promotes the growth of those industrial sectors that are more in need of external finance by facilitating credit access to younger firms. However, we also find evidence of a general depressing effect on growth associated with a concentrated banking industry, which impacts all sectors and all firms indiscriminately.

Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets

Published: 01/20/2006   |   DOI: 10.1111/j.1540-6261.2006.00841.x

NICOLA CETORELLI, PHILIP E. STRAHAN

This paper tests how competition in local U.S. banking markets affects the market structure of nonfinancial sectors. Theory offers competing hypotheses about how competition ought to influence firm entry and access to bank credit by mature firms. The empirical evidence, however, strongly supports the idea that in markets with concentrated banking, potential entrants face greater difficulty gaining access to credit than in markets in which banking is more competitive.