ساختار بازار بانکداری، نیازهای نقدینگی و نوسانات رشد صنعتی

While the existing literature acknowledges the effect of banking structure on industrial growth as well as the effect of financial development on industrial growth and its volatility, we examine whether banking structure, given financial development, exerts any nontrivial effect on industrial growth volatility. We show that bank concentration magnifies industrial growth volatility, but reduces the volatility in sectors with higher external liquidity needs. The reduction in industrial growth volatility mostly reflects the smoothing in the volatility of real value added per firm growth. A variety of sensitivity checks show that our findings remain for different model specifications, banking market structure measures, liquidity need indicators, and omitted variables.

In the past two decades, theoretical and empirical work rationalizes and supports the view that financial development exerts a significantly positive effect on economic growth (Levine, 1997 and Levine, 2005). Rajan and Zingales (1998, RZ) examine external finance as a mechanism through which financial development improves economic growth. They propose a novel specification that they apply to a large panel of cross-country, cross-industry data and find strong evidence that industries more dependent on external financing grow faster in countries with better developed financial systems. In their specification, the growth of new establishments represents the key factor through which financial development enhances industrial growth. Another strand of the literature explores whether financial development plays a role in the determination of growth volatility. For example, Raddatz (2006) applies the RZ specification and finds that financial development reduces growth volatility in sectors that need larger amounts of external liquidity, where the reduction in the volatility mainly comes from stabilizing the output growth of existing firms. The effect of financial development on growth volatility remains ambiguous, however.1 Researchers typically measure financial development by the ratio of claims on the private sector by deposit money banks and other financial institutions to GDP (e.g., Aghion et al., 2005 and Levine et al., 2000). Given their measure of bank (financial) development, Cetorelli and Gambera (2001) investigate whether the market structure of the banking system exerts any influence on economic growth. Specifically, the authors test whether, for a given bank (financial) development, the amount of credit provided by more competitive or concentrated banking industry matters. The effect of bank concentration on industrial growth is ambiguous. Pagano (1993) argues that any deviation from perfect competition in the banking market leads to inefficiencies that harm firms' access to credit, thus, hindering economic growth. Mayer (1988) and Petersen and Rajan (1995) show that more concentrated banking markets cause a larger incentive for banks to establish lending relationships with their client firms, thus facilitating their access to credit lines and, thus, enhancing their growth. Utilizing the RZ cross-country, cross-industry framework, Cetorelli and Gambera (2001) provide empirical results showing that bank concentration exerts a negative effect on industrial growth as a whole but industries that depend more on external finance grow faster in a more concentrated banking system. Claessens and Laeven (2005), however, show that a higher level of competition in the banking system promotes economic growth in the industries that rely more on external financing. Deidda and Fattouh (2005) argue that a nonlinear relationship exists between concentration and growth. That is, the concentration effect depends on economic development. They find that banking concentration associates negatively with both per-capita real income growth and industrial growth in low-income countries, but no significant relationship emerges in high-income countries.2 Policy makers identify output growth stability as one of the several macroeconomic policy objectives (Mishkin, 2009 and Yellen and Akerlof, 2006). Many adverse effects occur because of higher output growth volatility, such as lower economic growth (Aghion et al., 2010 and Ramey and Ramey, 1995), worsened income distribution (Breen and Garcia-Peñalosa, 2005), and higher output and employment costs (Benigno and Ricci, 2011).3 A successful macroeconomic policy to stabilize or reduce growth volatility depends on knowing the sources of that volatility. Intuitively, any mechanism through which financial development affects economic growth may also affect growth volatility. For example, following Rajan and Zingales (1998), Raddatz (2006) finds a larger reduction in growth volatility in industrial sectors with high liquidity needs.4 As an extension of Cetorelli and Gambera (2001), we anticipate that banking market structure influences not only growth but also its volatility. That is, bank concentration will stabilize growth for industries with higher external liquidity needs, if banks with more market power will experience more incentives to establish and maintain long-term relationships with firms to alleviate information asymmetry and moral hazard and, thus, provide funds to firms on favorable terms even in bad times as they can extract more rents during periods of economic expansion. This paper examines how growth volatility compares between a country with an unconcentrated, thus, more competitive, banking sector or with a relatively concentrated banking system where banks exert more market power. To this end, we rely on Raddatz's (2006) specification, augmented with alternative measures of banking market structure (bank concentration or bank competition), to test whether bank concentration leads to an increase or decrease in the volatility of industries with higher liquidity needs, after controlling for the size of the banking sector in a country. As such, this study provides a synthesis of (and/or a complement to) Cetorelli and Gambera (2001) and Raddatz (2006). That is, we consider the effect of bank concentration on the volatility, controlling for bank development. Using Raddatz's (2006) data on 70 manufacturing industries in 47 countries over the 1981 to 1998 period, we first examine the average effect of bank concentration on industrial growth volatility. That is, we test whether, overall, the growth patterns of industries exhibit more or less volatility if they operate within a more concentrated banking system. Our empirical results show that higher concentration in the banking sector strongly associates with larger industrial growth volatility. Thus, countries with a more concentrated banking market display higher industrial growth volatility. We also confirm that bank development, characterized by a large banking sector, stabilizes industrial volatility. Cetorelli and Gambera (2001) detect that a more concentrated banking sector associates with lower industrial growth while a larger banking sector associates with higher industrial growth. We show that both the market structure and the size of a banking system exert a nontrivial, opposite effect on industrial growth volatility. Additionally, we confirm Cecchetti and Kharroubi's (2012) finding that more finance does not always make things better. The authors report an inverted U-shaped relationship between finance and growth. We discover a U-shaped relationship between bank development and growth volatility. Second, the use of industry-specific information allows us to explore more deeply the role played by banking market structure on industrial growth volatility and permits us to determine whether bank concentration exerts a heterogeneous effect across industrial sectors. For this purpose, we estimate alternative regressions of industrial volatility on the interaction between an industry's liquidity needs and a country's bank concentration, controlling for country and industry dummies and other determinants of volatility. The estimated coefficients on the interaction between bank concentration and liquidity indicate a negative and significant relationship at conventional levels. These results suggest that industries more dependent on external liquidity enjoy a beneficial effect on growth volatility in countries with more concentrated banking systems. Cetorelli and Gambera (2001) argue that market power in the banking system facilitates the formation of lending relationships, which, in turn, enhances industrial growth. With this channel, we show that bank concentration alleviates industrial growth volatility and the fall in volatility mainly reflects smoothing of the variance of growth in output per firm. Moreover, we provide evidence to show a nonlinear relationship between bank concentration and economic development. Deidda and Fattouh (2005) find that bank concentration associates negatively and significantly with industrial growth in low-income countries, but the significance disappears in high-income countries. When considering the level of economic development, we discover no effect of bank concentration on industrial growth volatility for more developed countries. The paper is organized as follows. Section 2 describes the empirical strategy first proposed by Rajan and Zingales (1998), and later used by Cetorelli and Gambera (2001) and Raddatz (2006). Section 3 describes the definitions and sources of data. Section 4 presents our main empirical results. Section 5 performs a variety of robustness checks. Section 6 concludes.

Completing the analysis of Cetorelli and Gambera (2001) and Raddatz (2006), this study explores whether banking market structure, given the development of a country's banking sector, plays a role in determining industrial growth volatility. By applying the Rajan and Zingales (1998) specification to a large panel data of 47 countries, 70 four-digit ISIC industries, some interesting findings emerge. First, significant evidence indicates that bank concentration exerts a common inflating effect on industrial growth volatility, which conforms to the view that a concentrated banking system imposes a deadweight loss in the credit market and on the economy (Cetorelli and Gambera, 2001). This adverse effect, however, disappears for more developed countries, which confirms a nonlinear relationship between bank concentration and growth (Deidda and Fattouh, 2005). Second, further examination suggests that bank concentration exerts heterogeneous effects across sectors. A more concentrated banking industry reduces the growth volatility in sectors that depend more on external liquidity needs. This result favors the theoretical prediction that concentration in the banking system facilitates relationship lending and, as a consequence, increases industrial output (Hoxha, 2013) and its growth (Cetorelli and Gambera, 2001) and smoothes the volatility of industrial growth. Third, considering the channels through which bank concentration affects sectoral volatility, the evidence shows that bank concentration stabilizes industrial volatility mainly by smoothing the variance of real value-added per firm growth. Thus, in addition to the volatility-reducing effect of financial development that comes from the stabilization of the output of existing firms (Raddatz, 2006), more concentrated banking systems amplify the reduction in growth volatility caused by more financial development, particularly through the output of existing firms that need more external liquidity. Additionally, a U-shaped volatility-reducing effect of bank development emerges, which supports the argument that more finance does not always make things better (Cecchetti and Kharroubi, 2012). Finally, the above findings remain robust to alternative model specifications, banking market structure measures, liquidity needs indicators, and additional country control variables.