Are Credit Markets Still Local? Evidence from Bank Branch Closings
By Hoai-Luu Q. Nguyen. American Economic Journal: Applied Economics, 2019
298 citations recorded by the source corpus.
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 $453,000 after a closing, off a baseline of $4.7 million, and remain depressed for up to six years. The effects are very localized, dissipating within six miles, and are especially severe during the financial crisis. (JEL G21, G34, L22, R12, R32)
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/72c0bd4abec0cd95955bef0c09e14bae35426861
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Citations in the corpus
- Peer-to-Peer Lenders Versus Banks: Substitutes or Complements? (2019, background): “The first is the impact of bank branch closings on P2P lending.20 Nguyen (2017) reports that branch closings have a negative effect on the credit supply to local small businesses even in markets where the branch network is dense.”