The Effect of Bank Concentration on Entrepreneurship in Central and Eastern European Transition Countries

Abstract

This paper sheds light on the impact of bank concentration on the entrepreneurial initiative in the Central and Eastern European transition countries over the period 2000-2007. Our investigation provides evidence of a non-monotonic relationship: bank concentration promotes entrepreneurship; however, too great a concentration becomes harmful. Moreover, the positive effect decreases for high-technology-intensive sectors. Entrepreneurship is also encouraged by well-developed financial markets, quality governments, policies to prevent corruption and executive property rights protection.