Bank competition and corporate risk: <scp>Firm‐level</scp> evidence from <scp>BRIC</scp> economies

Abstract The study analyzes the potential influence of bank competition on corporate risk‐taking. also interactive role firms' dependence external finance in this framework. We gauge risk through idiosyncratic (market‐based measure) and earnings volatility (accounting‐based measure). Analysing firm‐level data for Brazil, Russia, India, China (BRIC) from 1999 to 2018 a ‘two‐step dynamic panel system GMM,’ we discover that more (less) competitive (concentrated) banking sectors assist reducing taking. risk‐reduction effect is specifically stronger financially dependent small‐sized firms. findings remain unchanged when different proxies financial dependency, sector competitiveness, are employed. Further analysis ‘transmission mechanism’—the channel by which extent competitiveness influences risk—uncovers increase access allow them operate with lesser financing obstacles.