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The influence of bank branch closure on entrepreneurship sustainability
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Banking and Finance.ORCID iD: 0000-0001-8205-5918
(English)Manuscript (preprint) (Other academic)
Abstract [en]

We study the influence of bank branch closure on new firm formation in Sweden, with a panel database that captures the geographical locations of all the Swedish bank branches from 2000 to 2013. Using spatial econometric analysis at a municipal level, we show that bank proximity to firms is vital for entrepreneurship to thrive and sustain in Sweden. From the Fixed-Effects spatial models, the increase in distance to the banks due to bank branch closure is shown to affect new firm formation negatively. The further a firm is located away from the bank, the higher the monitoring cost is for the banks. The increase in distance also results in an increase in information asymmetries because of the banks’ eroded ability to collect soft information about the borrower firm. Due to high risks associated with the lack of information and uncertainty, banks might not be as willing to loan money to a distant firm compared to a nearby firm. Furthermore, the presence of neighbourhood spillover effects is evidenced through the Moran’s I statistics, which means that the omission of spatial effects in the analysis would have resulted in biased estimates.

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Economics and Business
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URN: urn:nbn:se:kth:diva-263797OAI: oai:DiVA.org:kth-263797DiVA, id: diva2:1370145
Available from: 2019-11-14 Created: 2019-11-14Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf