Finance and Economics Discussion Series (FEDS)
August 2024
Out of Sight, Out of Mind: Nearby Branch Closures and Small Business Growth
Ben Ranish, Andrea Stella, and Jeffery Zhang
Abstract:
Since 2010, the total number of commercial bank branches in the United States has fallen by about 20%. Do branch closures meaningfully affect economic activity? We investigate the impact of branch closures on small businesses, whose credit access may be facilitated through local relationships with bankers. We use exogenous variation in branch closures related to mergers and acquisitions to show that closures of nearby branches decrease small business employment growth and entry. Our results are robust to variations in our measure of employment, proximity, and construction of the instrument. Altogether, our analysis highlights the importance of local bank branches to small businesses.
Keywords: Credit access; small businesses; firm growth; branch closures; bank mergers; Longitudinal Business Database.
DOI: https://doi.org/10.17016/FEDS.2024.071
PDF: Full Paper
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