Financial sector structure, governance quality, and access to finance

This paper compares financial sector concentration and competition within the same framework and examines how they relate to firms' access to finance across different levels of reported obstacle severity. Higher financial sector concentration is associated with a greater likelihood that firms report severe obstacles to accessing finance, and lower financial sector competition is likewise associated with a greater likelihood of severe obstacles. Stronger governance strengthens the relationship whereby greater financial sector competition is associated with fewer reported obstacles to accessing finance. For financial sector concentration, the moderating role of governance varies with obstacle severity and the sample window, and concentration-based associations are more sensitive to the sample period, especially in recent years. These findings can guide how policymakers interpret proxies for concentration and competition and underscore the relevance of governance when considering conditions for firms' access to finance.