The influence of banking competition on a firm's cost of and access to credit: Evidence from ASEAN-5 countries

This research investigates the effect of bank competition on a firm's cost of and access to credit. Previous studies in developed countries found that bank competition increases the cost of credit, which is in line with the information hypothesis. Bank competition also increases a firm's access to credit based on the market power hypothesis. However, the banking industry in developing countries has different characteristics compared to developed counties and this leads to a different result. Using data from ASEAN-5 countries from 2005 to 2016, this study found that the increase of banking competition leads to an easier access for a firm to obtain credit. Increased competition also decreases the cost of credit paid by the firm. We also find that the effect of bank competition on cost of credit is generally influenced by a firm's size and tangibility.