Local Banking Supply and Private Firm Activity: Evidence from Branch Closures

Francis Haoyu Fang and Razvan Vlaicu

No 13645, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Private firms establish relationships with banks in local markets to obtain adequate financing for their operations through credit and loans. As major banks reduced their branch networks in recent years, many firms have lost access to their local bank. We evaluate the impact of a large number of branch closures on firm operations, wages and employment, and economic output in Brazil from 2011 to 2021. We adopt a difference-in-differences strategy with staggered treatment timing, employing both two-way fixed effects and Callaway-Sant'Anna estimators. Our study finds that bank branch closures result in a reduction in establishments with active operations from 1.2% initially to 8.1% within 4-7 years, a 0.5 decline in weekly hours of formal employment, and a compression in the real wage distribution. Micro firms, trade and service firms, and agricultural firms are found to be the most vulnerable. Our study highlights the importance of physical bank branches that provide financial access and meet the localized financial demand of several types of firms.

Keywords: Bank branch closures; Employment; Firm activity; Economic Impact; Financial Access; Brazil; Firm operations (search for similar items in EconPapers)
JEL-codes: G21 J21 R11 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-cfn, nep-fdg and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... -Branch-Closures.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

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:idb:brikps:13645

DOI: 10.18235/0013076

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().