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The Effect of Bank Branch Closure on New Firm Formation: The Swedish Case
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Banking and Finance.ORCID iD: 0000-0002-3489-217X
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Banking and Finance.ORCID iD: 0000-0001-8205-5918
(English)In: The annals of regional science, ISSN 0570-1864, E-ISSN 1432-0592Article in journal (Refereed) Submitted
Abstract [en]

In this paper, the effect of local bank branch closures on new firm formation in Sweden is analysed using a panel database that captures the ge- ographical locations of all Swedish bank branches from 2000 to 2013. Previous research has shown that the farther a firm is located away from the bank, the higher the monitoring costs will be for the banks. Furthermore, an increase in distance will also result in an increase in information asymmetry because of the banks’ eroded ability to collect and analyse soft information. Due to high risks associated with the lack of information and uncertainty, banks might not be as willing to extend credits to a distant firm compared to a nearer firm. Using spatial econometric analysis at a municipal level, it is shown that bank proximity to firms, firm density, establishment size and human capital are vital for new firm formation in Sweden, after accounting for possible reverse causality. From the random effects spatial panel model, the increase in distance to the banks due to bank branch clo- sure is shown to negatively affect new firm formation. Furthermore, the presence of neighbourhood spillover effects is evidenced through Moran’s I statistics, which means that the omission of spatial effects in the analysis would have resulted in biased estimates.

Keywords [en]
New firm formation · Bank Branch · Spatial analysis · Financing
National Category
Economics and Business
Research subject
Economics
Identifiers
URN: urn:nbn:se:kth:diva-259723OAI: oai:DiVA.org:kth-259723DiVA, id: diva2:1353248
Available from: 2019-09-21 Created: 2019-09-21 Last updated: 2019-09-21
In thesis
1. Bank branches and Entrepreneurship: A spatial analysis of new firm formation in Swedish regions and industries in a changing financial landscape
Open this publication in new window or tab >>Bank branches and Entrepreneurship: A spatial analysis of new firm formation in Swedish regions and industries in a changing financial landscape
2019 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

The purpose of this thesis is to analyse how bank branch closure has affected the formation of new firms and to explore the varying local relationships between the accessibility of bank branches and new firm formation in 290 Swedish municipalities. In the first paper, the effect of bank branch closure is examined through spatial econometric analysis, in particular, the fixed effects and the random effects spatial panel models. The findings of the first paper show that an increase in the weighted distance to the nearest bank branches due to bank branch closure negatively affects new firm formation, based on the random effects spatial panel model. The analysis also shows that spatial effects should be included in the analysis due to spill-over effects from neighbouring municipalities. In the second paper, the varying relationships between new firm formation and its determinants in 290 Swedish municipalities are examined through Geographically weighted regression (GWR). Mostly positive relationships with new firm formation are shown for firm density, human capital level, industry diversification level and percentage of immigrants living in the area. In contrast, mostly negative relationships are shown for weighted mean distance to the nearest bank branches, establishment size, unemployment rate, industry specialization. Spatially constrained multivariate clustering is also applied to group municipalities with similar conditions. Patterns in the industry composition and the location attributes are analysed for each cluster.

Abstract [sv]

Syftet med denna avhandling är att analysera hur nedläggningen av bankkontorpåverkar frekvensen av nystartade företag och undersöker sambandet mellannystartsfrekvens och avståndet till närmaste bankkontor i Sveriges 290 kommuner.I avhandlingens första artikel studeras effekten av kontorsnedläggelse genom enrumslig ekonometrisk analys och rumsliga panel modeller. Resultaten visar att enökning av avståndet till närmaste bankkontor har en negativ påverkan pånyföretagandet. Vidare ger analysen vid handen att spatiala effekter bör inkluderasi analysen då det förekommer spill-over effekter från närliggande kommuner. Iavhandlingens andra artikel undersöks hur frekvensen av nystartade företag iSveriges 290 kommuner påverkas av ett antal olika faktorer, med hjälp av engeografiskt viktad regressionsmodell. Analysen visar att antalet befintliga företag,humankapital, näringslivets diversifiering, samt andelen invandrare, har ett positivtsamband med nystartsfrekvensen. Däremot finns det ett negativt samband mellannystartsfrekvens och avståndet till närmaste bankkontor, storleken bland debefintliga företagen, arbetslöshet och näringslivets specialisering. En multivariatklusteranalys har också genomförts där kommunerna fördelats över kluster medliknande egenskaper, där de ingående kommunerna har liknande förutsättningaroch strukturer.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2019. p. 48
Series
TRITA-ABE-DLT ; 1936
Keywords
New firm formation, entrepreneurship, financing, bank branches, proximity, spatial analysis, GWR, Sweden
National Category
Economics and Business
Research subject
Business Studies
Identifiers
urn:nbn:se:kth:diva-259725 (URN)978-91-7873-291-3 (ISBN)
Presentation
2019-10-15, Bora Bora, Teknikringen 10B, Stockholm, 10:00 (English)
Opponent
Supervisors
Note

QC 20190923

Available from: 2019-09-23 Created: 2019-09-21 Last updated: 2019-09-23Bibliographically approved

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