Banking diversity and firms' exit: A study on Italian data

With Italian data, this paper investigates the role of institutional banking diversity on firms' exit. Using the Gini-Simpson index, a measure of biodiversity drawn from ecological sciences, we find that banking diversity would have reduced firms' exit rates in the period under investigation (2009-2020), and such a beneficial effect appears sharper for the years of the last financial-sovereign crisis. Both of these findings seem to support the "biodiversity argument" pioneered by Ayadi et al. (2009, 2010), stating that - beyond the merits of any particular bank institutional model - it is indeed the coexistence of a mix of different credit institutions that matters in favouring the financing of the real economy, especially in a scenario characterized by financial turmoil and uncertainty. As a policy recommendation, authorities should promote regulations that, avoiding bias towards a specific bank model, aim to preserve and promote biodiversity in the banking sector.