A longitudinal study on the effects of bank branch accessibility on new firm formation in different industries.

This paper studies the effects of bank branch accessibility on new firm formation in different industries after the closures of bank branches between 2007 and 2013. Spatial Durbin models are used for a panel dataset of two years — 2007 and 2013 — at the municipal level in all 290 Swedish municipalities. Potential endogeneity issues are controlled for by using an instrumental variable approach to estimate proximity to bank branches. Proximity to bank branches influences new firm formation in some industries in Swedish municipalities, with more pronounced effects in capital-intensive industries, such as manufacturing, ‘transport and communications’, and ‘education, health, and others’, as indicated by the results of using a proxy for proximity to bank branches weighted by firm population. The results of using the proxy for proximity to bank branches weighted by labour population show significant negative effects of proximity to bank branch on new firm formation in the ‘education, health and others’ industry. This study shows that it is important to consider the effects of proximity to bank branches on new firm formation in some industries that are more capital intensive. Policy-makers can use the findings of this research to design policies to increase entrepreneurship in certain industries.
QC 20211124