EconPapers    
Economics at your fingertips  
 

The effect of bank branch closures on new firm formation: the Swedish case

Cynthia Sin Tian Ho () and Björn Berggren
Additional contact information
Cynthia Sin Tian Ho: KTH - The Royal Institute of Technology
Björn Berggren: KTH - The Royal Institute of Technology

The Annals of Regional Science, 2020, vol. 65, issue 2, No 3, 319-350

Abstract: Abstract In this paper, the effect of local bank branch closures on new firm formation in Sweden is analysed using a panel database that captures the geographical locations of all Swedish bank branches in 2007 and 2013. The previous research has shown that the further a firm is located away from the bank, the higher the monitoring costs will be for the banks. Furthermore, an increase in the distance to the banks will also increase information asymmetry because of the banks’ eroded ability to collect and analyse soft information. Due to the high risks associated with the lack of information and uncertainty, banks might not be as willing to extend credits to a distant firm compared to a nearby firm. Using spatial econometric analysis at a municipal level, it is shown that bank proximity to firms, unemployment rate, industry structures, income growth, change in housing price and percentage of immigrants are vital for new firm formation in Sweden. From the spatial Durbin model with fixed effects, an increase in the weighted distance to the nearest bank branches is shown to affect new firm formation negatively.

Keywords: L26; G21; R11; C33 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s00168-020-00986-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:anresc:v:65:y:2020:i:2:d:10.1007_s00168-020-00986-4

Ordering information: This journal article can be ordered from
http://link.springer.com/journal/168

DOI: 10.1007/s00168-020-00986-4

Access Statistics for this article

The Annals of Regional Science is currently edited by Martin Andersson, E. Kim and Janet E. Kohlhase

More articles in The Annals of Regional Science from Springer, Western Regional Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2020-10-24
Handle: RePEc:spr:anresc:v:65:y:2020:i:2:d:10.1007_s00168-020-00986-4