Financial structures, banking regulations, and export dynamics

Abstract

Abstract This paper studies the impact of financial structures and regulations on export dynamics using data from a large panel of countries over the 1997–2014 period. The results suggest that bank-oriented financial systems can boost the number of exporters more than market-oriented systems. However, especially in lower income countries with lax bank regulation, banks tend to reduce the dynamism of the export sector, slowing down exporters’ entry and exit. This reduced dynamism appears to reflect domestic banks’ protection of incumbent exporters more than banks’ screening of entrants or buffering of incumbents in difficult times. Foreign banks mitigate these effects, enhancing the dynamism of the export sector.