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Why do banks close? The geography of branch pruning

Author

Listed:
  • Paolo Emilio Mistrulli

    (Bank of Italy)

  • Luca Antelmo

    (Bank of Italy)

  • Maddalena Galardo

    (Bank of Italy)

  • Iconio Garrì

    (Bank of Italy)

  • Dario Pellegrino

    (Bank of Italy)

  • Davide Revelli

    (Bank of Italy)

  • Vito Savino

    (Bank of Italy)

Abstract

In the aftermath of the Great Recession, the number of bank branches declined in most of developed countries. In this paper, we investigate how banks have downsized their branch networks in Italy, by comparing the pre and post crisis spatial distribution of branches. By using a detailed dataset that includes a wide set of controls for the characteristics of each bank branch, we estimate the probability of a branch being closed as a function of its distance from both proprietary and competitors’ branches. We find that banks are more prone to close branches in those areas where other proprietary branches are closer and also where competitors’ branches are closer. This indicates that, since the start of the crisis, banks have closed branches especially in those areas where their proprietary network was relatively more populated and competition was fiercer.

Suggested Citation

  • Paolo Emilio Mistrulli & Luca Antelmo & Maddalena Galardo & Iconio Garrì & Dario Pellegrino & Davide Revelli & Vito Savino, 2019. "Why do banks close? The geography of branch pruning," Questioni di Economia e Finanza (Occasional Papers) 540, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_540_19
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    References listed on IDEAS

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    Cited by:

    1. Valter Di Giacinto & Marcello Pagnini, 2021. "Local and global agglomeration patterns in the banking sector: the calm in the mid of a storm," Questioni di Economia e Finanza (Occasional Papers) 610, Bank of Italy, Economic Research and International Relations Area.
    2. Iconio Garrì, 2019. "The effects of bank branch closures on credit relationships," Temi di discussione (Economic working papers) 1254, Bank of Italy, Economic Research and International Relations Area.
    3. Angelo Castaldo & Giuliana De Luca & Berardino Barile, 2021. "Does Initial Access To Bank Loans Predict Start‐Ups' Future Default Probability? Evidence From Italy," Contemporary Economic Policy, Western Economic Association International, vol. 39(1), pages 83-106, January.

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    More about this item

    Keywords

    Bank Branch; Geographical Location; Market Structure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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