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Why do banks close? The geography of branch pruning

Paolo Emilio Mistrulli (), Luca Antelmo (), Maddalena Galardo, Iconio Garrì (), Dario Pellegrino, Davide Revelli () and Vito Savino ()
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Luca Antelmo: Bank of Italy
Iconio Garrì: Bank of Italy
Davide Revelli: Bank of Italy
Vito Savino: Bank of Italy

No 540, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In the aftermath of the Great Recession, the number of bank branches declined in most of developed countries. In this paper, we investigate how banks have downsized their branch networks in Italy, by comparing the pre and post crisis spatial distribution of branches. By using a detailed dataset that includes a wide set of controls for the characteristics of each bank branch, we estimate the probability of a branch being closed as a function of its distance from both proprietary and competitors’ branches. We find that banks are more prone to close branches in those areas where other proprietary branches are closer and also where competitors’ branches are closer. This indicates that, since the start of the crisis, banks have closed branches especially in those areas where their proprietary network was relatively more populated and competition was fiercer.

Keywords: Bank Branch; Geographical Location; Market Structure (search for similar items in EconPapers)
JEL-codes: G21 L10 R3 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-ban, nep-com, nep-geo, nep-mon and nep-ure
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