This paper analyzes how the regulatory change in the state-level banking market competition affects corporate investment. We show that a state opened to interstate branching has a competitive banking industry but experiences a reduction in corporate investment activities. It appears that entrant banks are reluctant to issue loans since they lack information on the credit quality of the borrowing firms. On the contrary, incumbent banks from the states without newly entered banks are likely to show more aggressive lending activities. Our findings are consistent with the view from the extant literature that credit availability is associated with the degree of information asymmetry between borrowers and lenders.