Where the money is: branch network structure and bank profitability in Switzerland

Marc Domenic Fuchs, Jojo Jacob and Florian Kiesel
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Marc Domenic Fuchs: EESC-GEM Grenoble Ecole de Management
Jojo Jacob: FMCO - Financial Markets & Corporate Outcomes - Rennes School of Business - ESC [Rennes] - ESC Rennes School of Business
Florian Kiesel: Free University of Bozen-Bolzano

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Abstract: This paper investigates the impact of the geographic concentration of branch networks on bank profitability in Switzerland. Leveraging Switzerland's distinctive federalist fiscal structure, where communes set their own income tax rates, we also explore whether the tax burden of branch locations moderates this relationship. Using a hand-collected dataset of branch networks of commercial banks, we find that geographic branch network concentration positively affects bank profitability but only when banks concentrate their branches in low-tax communes. This suggests that the proximity to wealthy clients, who are more likely to reside in low-tax areas, enhances bank profitability.

Date: 2024-04-25
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Published in European Journal of Finance, 2024, pp.1-32. ⟨10.1080/1351847X.2024.2344065⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04638956

DOI: 10.1080/1351847X.2024.2344065

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