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The effects of bank branch closures on credit relationships

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  • Iconio Garrì

    (Bank of Italy)

Abstract

This paper studies the effects of bank branch closures on individual business borrowers, using a sample of events that occurred in Italy between 2010 and 2014. I find that a branch closing down increases the probability of a credit relationship terminating. The impact is weaker the shorter the distance from an alternative branch of the bank, the longer the duration of the relationship and the greater the bank’s share of loans to the firm. However, branch closure is not generally associated with a decrease in the total amount of credit available for the firms formerly served by the closed branch. A temporary shrinkage of loans only occurs for small borrowers and short-term credit lines.

Suggested Citation

  • 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.
    • Handle: RePEc:bdi:wptemi:td_1254_19
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2019/2019-1254/en_tema_1254.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bank branch; closures; lending relationship; matching;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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