This paper aims to investigate the effects of accessibility to bank branches on the capital structure of small- and medium-sized enterprises (SMEs) by analysing the change in three different leverage measures (total, short-term and long-term leverage). The analysis was conducted using random effects models on two data samples. The full sample consisted of 19,064 SMEs while the other sample used to estimate the long-term leverage consisted of 8707 SMEs over two years, 2007 and 2013. The results show that the distance to the nearest bank branch has a negative relationship with total leverage and short-term leverage but a small positive relationship with long-term leverage. An interesting result from the robustness test shows that the distance to the nearest bank negatively affects the long-term leverage of SMEs in rural areas. SME owners and policymakers may benefit from this research amidst the changing banking landscape; policymakers can help increase access to other types of funding for SMEs in bank deserts by increasing the volume of governmental loans. To the best of the authors’ knowledge, the distance to the nearest bank branch office has not been examined in the earlier literature as a determinant of the leverage of SMEs.

The geographical accessibility to banks and its relationship with new firm formation can vary across space due to spatial contexts. With increasing bank branch closures in Sweden, it is even more critical to understand where interventions are needed and at which scale, to implement effective policy. Thus, spatial context is incorporated into the analysis with the use of the multiscale geographically weighted regression (MGWR) model. A two-stage least squares (2SLS) model is employed in which two instrumental variables are utilised to instrument the proximity to the nearest bank branch in 2013. The MGWR results show that the geographical distance to the nearest bank branch has a negative association with new firm formation across all Swedish municipalities. The results also show that the relationship between the geographical distance to bank branches and new formation is not spatially varying across space. A policy implication from the analysis shows it is ideal to focus on the geographical accessibility to bank branches as it would continue to play an important role in the financing of new firms, regardless of the location.

Drawing on location theory, the local relationships between new firm formation and its determinants are explored in 290 municipalities across Sweden. From the robust geographically weighted regression (GWR) models, 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. This paper shows that the weighted distance to bank branches affect new firm formation negatively and this negative relationship is consistent across all the Swedish municipalities.

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 geographical locations of all Swedish bank branches in 2007 and 2013. The previous research has shown that the further a firm is located away from the bank, the higher the monitoring costs will be for the banks. Furthermore, an increase in the distance to the banks will also increase information asymmetry because of the banks’ eroded ability to collect and analyse soft information. Due to the 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 nearby firm. Using spatial econometric analysis at a municipal level, it is shown that bank proximity to firms, unemployment rate, industry structures, income growth, change in housing price and percentage of immigrants are vital for new firm formation in Sweden. From the spatial Durbin model with fixed effects, an increase in the weighted distance to the nearest bank branches is shown to affect new firm formation negatively.

Drawing on location theory, the local relationships between new firm formation and its potential determinants are explored in 290 municipalities across Sweden. From the geographically weighted regression (GWR) model in 2013, 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. 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. Implications of the GWR modelling and cluster analysis are then discussed.

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.

The dynamics of banking accessibility and its relationship with new firm formation can vary across space and time due to spatial contexts. With increasing bank branch closures in Sweden, it is even more critical to understand where interventions are needed and at which scale, in order to implement effective policy. Thus, spatial context is incorporated into the analysis with the use of the multiscale geographically weighted regression (MGWR) model. To overcome a potential endogeneity problem, an instrumental variable approach is applied. A two-stage least squares (2SLS) model is employed in which two instrumental variables are utilised to instrument the physical accessibility to the nearest bank branch in 2013. The MGWR results show that the geographical distance to the nearest bank branch has a negative association with the new firm formation in all Swedish municipalities, with little-to-no spatial heterogeneity. Further robustness tests show that the relationship between the geographical distance to the nearest bank branch and new firm formation are weaker in 2007, which shows temporal changes in the strength of the relationship over time. A policy implication from the analysis shows it is ideal to focus on the geographical accessibility to bank branches in all the Swedish municipalities with a single policy.