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.
Nguyen, Hoai-Luu Q.
"Are Credit Markets Still Local? Evidence from Bank Branch Closings."
American Economic Journal: Applied Economics,
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
Firm Organization and Market Structure
Size and Spatial Distributions of Regional Economic Activity
Other Spatial Production and Pricing Analysis