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Do businesses vote with their feet to access credit: local financial structure and business relocation

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  • Anil Rupasingha

    (USDA/Economic Research Service)

Abstract

This paper studies the impact of local financial structure on business relocation in the US from 2011 to 2015. It uses several proxies to measure the local financial structure at the county level, such as the average distance to the nearest commercial bank branch from a relocating establishment (operational distance), the average distance between bank branches and their headquarters (functional distance), the bank geographic concentration ratio, the amount of small business loans recorded under the Community Reinvestments Act (CRA), and the amount of bank deposits. The results show that operational distance has a negative effect on business relocation, particularly in metro counties, while functional distance has a positive effect. Additionally, the study found a negative relationship between banking market concentration and business relocation and a positive relationship between CRA loans and bank deposits with relocations. These findings are largely unchanged in terms of the direction of the effect and statistical significance with respect various robustness checks. When estimates are conducted based on the size and age of the relocating businesses, the results are likewise generally similar, with some small differences in terms of direction and statistical significance.

Suggested Citation

  • Anil Rupasingha, 2024. "Do businesses vote with their feet to access credit: local financial structure and business relocation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 72(3), pages 959-984, March.
    • Handle: RePEc:spr:anresc:v:72:y:2024:i:3:d:10.1007_s00168-023-01231-4
    DOI: 10.1007/s00168-023-01231-4
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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