FINANCIAL DEVELOPMENT AND ENTREPRENEURSHIP: THEORY AND EVIDENCE FOR INTERNATIONAL DATA IN THE CONTEXT OF BANK DIVERSITY

MY PHD THESIS EXAMINES THE RELATIONSHIP BETWEEN FINANCIAL DEVELOPMENT AND ENTREPRENEURSHIP, WITH A PARTICULAR FOCUS ON BANKING DIVERSITY AND THE DIFFERENT ROLES PLAYED BY FINANCIAL INSTITUTIONS (I.E. COOPERATIVES AND NON-COOPERATIVES) IN INTERNATIONAL CONTEXTS. THE THREE CHAPTERS THAT MAKE UP THE PHD THESIS COMBINE AN ADVANCED EMPIRICAL TECHNIQUE WITH A THEORETICAL PERSPECTIVE. THE FIRST CHAPTER RECONSTRUCTS THE EVOLUTION OF THE INTERNATIONAL FINANCIAL SYSTEM, WITH SPECIFIC EMPHASIS TO THE COMPARISON BETWEEN EUROPEAN UNION COUNTRIES AND NON-EU COUNTRIES. AFTER GOING OVER THE PROCESS OF ESTABLISHING THE BANKING UNION, THIS CHAPTER DISCUSSES THE ADVANCEMENTS ACHIEVED THROUGH THE CREATION OF THE SINGLE SUPERVISORY MECHANISM AND THE SINGLE RESOLUTION MECHANISM. IN ADDITION, IT ALSO HIGHLIGHTS THE LIMITATION REPRESENTED BY THE ABSENCE OF A COMMON EUROPEAN DEPOSIT GUARANTEE PROGRAM. THE ANALYSIS ALSO FOCUSES ON THE EXPANSION OF SHADOW BANKING IN EUROPE AND THE VULNERABILITIES ASSOCIATED WITH UNREGULATED INTERMEDIATION ACTIVITIES. ANOTHER CRUCIAL ASPECT THAT WILL BE DISCUSSED IS THE STRUCTURAL ROLE OF EUROPEAN SMES, WHO RELY MOSTLY ON BANK CREDIT AND EUROPEAN MEASURES TO DIVERSIFY SOURCES OF FUNDING THE SECOND CHAPTER EXPLORES THE IMPACT OF FINANCIAL DEVELOPMENT ON ENTREPRENEURSHIP THROUGH AN EMPIRICAL ANALYSIS CONDUCTED ON 51 COUNTRIES OVER THE PERIOD 2006-2020 APPLYING THE HETEROSKEDASTICITY INSTRUMENTAL VARIABLE APPROACH (IV-H) PROPOSED BY LEWBEL (2012). PARTICULAR ATTENTION IS PAID TO THE DISTINCTION BETWEEN COMMERCIAL BANKS AND COOPERATIVE BANKS/CREDIT UNIONS, TAKING INTO ACCOUNT THEIR VARIOUS MISSIONS, GOVERNANCE FRAMEWORKS, AND CAPACITIES FOR RISK ASSESSMENT. THE EMPIRICAL RESULTS SHOW THAT A HIGHER DENSITY OF BANK BRANCHES, BOTH COMMERCIAL AND COOPERATIVE, ENCOURAGES THE CREATION OF NEW BUSINESSES, ALTHOUGH THE EFFECT OF COMMERCIAL BANKS IS MORE PRONOUNCED. THERE ARE ALSO SIGNIFICANT FACTORS THAT INFLUENCE ENTREPRENEURSHIP, SUCH AS INCREASED TRADE OPENNESS AND PER CAPITA INCOME, WHICH BOOST ENTREPRENEURIAL ACTIVITY, AND HIGH POPULATION DENSITY, WHICH DECREASES THE LIKELIHOOD OF STARTING NEW ENTERPRISES. THE THIRD CHAPTER CONCLUDES WITH A THEORETICAL MODEL THAT COMPARES HOW COMMERCIAL AND COOPERATIVE BANKS BEHAVE WHEN MAKING DECISIONS ABOUT CREDIT SUPPLY. THE THEORETICAL FINDINGS CONFIRM THAT COOPERATIVE BANKS, WHICH PRIORITIZE THE WELL-BEING OF THEIR MEMBERS AND STAND OUT DUE TO THEIR LOCAL ORIGINS, STRONGLY SUPPORT LOCAL BUSINESS. THEORETICAL PREDICTIONS ARE VALIDATED BY EMPIRICAL EVIDENCE OBTAINED BY APPLYING THE INSTRUMENTAL VARIABLES ESTIMATION USING HETEROSKEDASTICITY-BASED INSTRUMENTS (IVH) TECHNIQUE TO A BALANCED SAMPLE OF TEN DEVELOPING COUNTRIES. THE EVIDENCE CONFIRMS THAT COOPERATIVES HAVE A PARTICULARLY POSITIVE IMPACT ON THE CREATION OF NEW BUSINESSES, PRIMARILY BECAUSE OF THEIR CAPACITY TO EVALUATE RISK ON A CASE-BY-CASE BASIS. THE EVIDENCE HIGHLIGHTS THE STRUCTURAL CHALLENGES COMMON TO DEVELOPING NATIONS, SUCH AS A LACK OF COLLATERAL, INEFFECTIVE BUREAUCRACY, AND RESTRICTED ACCESS TO FINANCIAL RESOURCES.