Bank Regulation Influence on Firm Loans: Borrowing from Banks or Non-banking Lenders

Student: Sobkevych Kyrylo

Educational Programme: Economics (Bachelor)

Year of Graduation: 2020

This study examines the choice of a source of financing by legal entities between bank loans and loans outside the banking sector. The study is conducted within developing countries based on data for 2010. A dependent variable in this model is the share of financing of investments and working capital of a firm by bank. Explanatory variables are banking sector regulation indicators and a number of control variables that explain the impact of firm characteristics and macroeconomic indicators. This study confirms hypotheses that stronger constraints to competition in the banking sector lead to a lower share of bank financing of firms' activities. While stricter capital adequacy regulations and deposit insurance systems increase the share of bank financing of companies' activities.

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