We document empirical support for a key micro-level channel—innovation by young, private firms—through which financial sector deregulation affects economic growth. We find that intrastate banking deregulation, which increased the local market power of banks, decreased the level and risk of...

We show that finance influences innovation by young private firms, an important source of long-term economic growth. We develop a simple theoretical model that predicts that a decrease (increase) in banks' bargaining power vis-a-vis entrepreneurs increases (decreases) both the volume and...

Is bank financing compatible with innovation? We show that an exogenous enhancement in value of borrowers' patents, either through greater patent protection or creditor rights over collateral, results in cheaper loans. Using regression discontinuity design, we show while R\&D investment drops...

We document empirical support for a key micro-level channel --- innovation by young, private firms --- through which financial sector deregulation affects economic growth. We find that intrastate banking deregulation, which increased the local market power of banks, decreased the level and risk...