Are Credit Markets Still Local? Evidence from Bank Branch Closings
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Abstract
This paper studies whether distance shapes credit allocation by estimating the impact of bank branch closings during the 2000s on local access to credit. To generate plausibly exogenous variation in the incidence of closings, I use an instrument based on within-county, tract-level variation in exposure to post-merger branch consolidation. Closings lead to a persistent decline in local small business lending. Annual originations fall by $453K after a closing, off a baseline of $4.7 million, and remain depressed for up to 6 years. The effects are very localized, dissipating within 6 miles, and are especially severe during the financial crisis.Citation
Nguyen, Hoai-Luu Q. 2019. "Are Credit Markets Still Local? Evidence from Bank Branch Closings." American Economic Journal: Applied Economics, 11 (1): 1-32. DOI: 10.1257/app.20170543Additional Materials
JEL Classification
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L22 Firm Organization and Market Structure
- R12 Size and Spatial Distributions of Regional Economic Activity
- R32 Other Spatial Production and Pricing Analysis
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