IDEAS home Printed from https://ideas.repec.org/p/cep/sercdp/0058.html
   My bibliography  Save this paper

Bank Location and Financial Liberalization Reforms: Evidence from Microgeographic Data

Author

Listed:
  • Marieke Huysentruyt
  • Eva Lefevere
  • Carlo Menon

Abstract

We examine the effects of bank deregulation on the spatial dynamics of retail-bank branching, exploiting, much like a quasi-natural experiment, the context of intense liberalization reforms in Belgium in the late nineties. Using .ne-grained data on branch network dynamics within the metropolitan area of Antwerp and advancing novel spatial econometric techniques, we show that these liberalization reforms radically shifted and accelerated branch network dynamics. Entry and exit dynamics substantially intensified, the level change in financial void grew significantly, and bank choice markedly declined. Moreover, all these changes consistently extended (even with greater intensity) after the liberalization peak. However, the immediate and longer-term spatial ramifications of the financial sector liberalization were very distinct. All immediate changes systematically, differentially impacted the poorer and wealthier neighborhoods, disenfranchising the poorer neighbourhoods and favoring their wealthier counterparts. The longer-term effects on spatial patterns of change no longer exhibited this systematic relationship with neighborhood income. We draw out the policy implications of our findings.

Suggested Citation

  • Marieke Huysentruyt & Eva Lefevere & Carlo Menon, 2010. "Bank Location and Financial Liberalization Reforms: Evidence from Microgeographic Data," SERC Discussion Papers 0058, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:sercdp:0058
    as

    Download full text from publisher

    File URL: http://cep.lse.ac.uk/pubs/download/sercdp0058.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, February.
    2. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
    3. Hans Degryse & Luc Laeven & Steven Ongena, 2009. "The Impact of Organizational Structure and Lending Technology on Banking Competition," Review of Finance, European Finance Association, vol. 13(2), pages 225-259.
    4. Degryse, Hans & Ongena, Steven, 2007. "The impact of competition on bank orientation," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 399-424, July.
    5. S. P. Chakravarty, 2006. "Regional variation in banking services and social exclusion," Regional Studies, Taylor & Francis Journals, vol. 40(4), pages 415-428.
    6. Goddard, John & Molyneux, Philip & Wilson, John O.S. & Tavakoli, Manouche, 2007. "European banking: An overview," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 1911-1935, July.
    7. Michaela Draganska & Sanjog Misra & Victor Aguirregabiria & Pat Bajari & Liran Einav & Paul Ellickson & Dan Horsky & Sridhar Narayanan & Yesim Orhun & Peter Reiss & Katja Seim & Vishal Singh & Raphael, 2008. "Discrete choice models of firms’ strategic decisions," Marketing Letters, Springer, vol. 19(3), pages 399-416, December.
    8. Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 1077-1106.
    9. Vittoria Cerasi & Barbara Chizzolini & Marc Ivaldi, 2002. "Branching and competition in the European banking industry," Applied Economics, Taylor & Francis Journals, vol. 34(17), pages 2213-2225.
    10. Sutton, John, 1996. "Technology and market structure," European Economic Review, Elsevier, vol. 40(3-5), pages 511-530, April.
    11. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    12. Luc Anselin & Raymond J. G. M. Florax, 1995. "Small Sample Properties of Tests for Spatial Dependence in Regression Models: Some Further Results," Advances in Spatial Science, in: Luc Anselin & Raymond J. G. M. Florax (ed.), New Directions in Spatial Econometrics, chapter 2, pages 21-74, Springer.
    13. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
    14. Astrid A. Dick, 2006. "Nationwide Branching and Its Impact on Market Structure, Quality, and Bank Performance," The Journal of Business, University of Chicago Press, vol. 79(2), pages 567-592, March.
    15. Eric Marcon & Florence Puech, 2003. "Evaluating the Geographic Concentration of Industries Using Distance-Based Methods," Post-Print halshs-00372646, HAL.
    16. sutton, John, 1989. "Endogenous sunk costs and the structure of advertising intensive industries," European Economic Review, Elsevier, vol. 33(2-3), pages 335-344, March.
    17. Alegria, Carlos & Schaeck, Klaus, 2008. "On measuring concentration in banking systems," Finance Research Letters, Elsevier, vol. 5(1), pages 59-67, March.
    18. Smith, Tony E. & Smith, Marvin M. & Wackes, John, 2008. "Alternative financial service providers and the spatial void hypothesis," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 205-227, May.
    19. Gual, Jordi, 1999. "Deregulation, Integration and Market Structure in European Banking," CEPR Discussion Papers 2288, C.E.P.R. Discussion Papers.
    20. Anselin, Luc & Hudak, Sheri, 1992. "Spatial econometrics in practice : A review of software options," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 509-536, September.
    21. Gual, Jordi, 1999. "Deregulation, Integration, and Market Structure in European Banking," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 372-396, December.
    22. A Leyshon & N Thrift, 1996. "Financial Exclusion and the Shifting Boundaries of the Financial System," Environment and Planning A, , vol. 28(7), pages 1150-1156, July.
    23. Lisa George & Joel Waldfogel, 2003. "Who Affects Whom in Daily Newspaper Markets?," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 765-784, August.
    24. Gual, Jordi, 1999. "Deregulation, integration and market structure in European banking," IESE Research Papers D/397, IESE Business School.
    25. Evren Damar, H., 2007. "Does post-crisis restructuring decrease the availability of banking services? The case of Turkey," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2886-2905, September.
    26. Katja Seim, 2006. "An empirical model of firm entry with endogenous product‐type choices," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 619-640, September.
    27. Debabrata Talukdar, 2008. "Cost of Being Poor: Retail Price and Consumer Price Search Differences across Inner-City and Suburban Neighborhoods," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 35(3), pages 457-471, July.
    28. Francesca Arnaboldi & Peter Claeys, 2008. "Internet Banking in Europe: a comparative analysis," IREA Working Papers 200811, University of Barcelona, Research Institute of Applied Economics, revised Sep 2008.
    29. Eric Marcon & Florence Puech, 2003. "Evaluating the geographic concentration of industries using distance-based methods," Journal of Economic Geography, Oxford University Press, vol. 3(4), pages 409-428, October.
    30. Eric Marcon & Florence Puech, 2003. "Evaluating the Geographic Concentration of Industries Using Distance-Based Methods," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00372646, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huysentruyt, Marieke & Lefevere, Eva & Menon, Carlo, 2013. "Dynamics of retail-bank branching in Antwerp (Belgium) 1991–2006: Evidence from micro-geographic data," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 291-304.
    2. Goddard, John & Molyneux, Philip & Wilson, John O.S. & Tavakoli, Manouche, 2007. "European banking: An overview," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 1911-1935, July.
    3. Lafourcade, Miren & Mion, Giordano, 2007. "Concentration, agglomeration and the size of plants," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 46-68, January.
    4. Giuseppe Espa & Giuseppe Arbia & Diego Giuliani, 2013. "Conditional versus unconditional industrial agglomeration: disentangling spatial dependence and spatial heterogeneity in the analysis of ICT firms’ distribution in Milan," Journal of Geographical Systems, Springer, vol. 15(1), pages 31-50, January.
    5. Cutrini, Eleonora, 2009. "Using entropy measures to disentangle regional from national localization patterns," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 243-250, March.
    6. Hiroyasu Inoue & Kentaro Nakajima & Yukiko Umeno Saito, 2019. "Localization of collaborations in knowledge creation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 119-140, February.
    7. William R. Kerr & Scott Duke Kominers, 2015. "Agglomerative Forces and Cluster Shapes," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 877-899, October.
    8. Gibbons, Steve & Overman, Henry G. & Patacchini, Eleonora, 2015. "Spatial Methods," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 115-168, Elsevier.
    9. Hans Degryse & Sanja Jakovljević & Steven Ongena, 2015. "A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 423-443, December.
    10. Valerien O. Pede & Raymond J. G. M. Florax & Henri L. F. de Groot & Gustavo Barboza, 2021. "Technological leadership and sectorial employment growth: A spatial econometric analysis for U.S. counties," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 50(1), February.
    11. Di Giacinto, Valter & Pagnini, Marcello, 2011. "Local and global agglomeration patterns: Two econometrics-based indicators," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 266-280, May.
    12. Eva Coll‐Martínez & Ana‐Isabel Moreno‐Monroy & Josep‐Maria Arauzo‐Carod, 2019. "Agglomeration of creative industries: An intra‐metropolitan analysis for Barcelona," Papers in Regional Science, Wiley Blackwell, vol. 98(1), pages 409-431, February.
    13. Mossay, Pascal & Shin, Jong Kook & Smrkolj, Grega, 2022. "Quality Differentiation and Spatial Clustering among Restaurants," International Journal of Industrial Organization, Elsevier, vol. 80(C).
    14. Beck, Thorsten & Ongena, Steven & Şendeniz-Yüncü, İlkay, 2019. "Keep walking? Geographical proximity, religion, and relationship banking," Journal of Corporate Finance, Elsevier, vol. 55(C), pages 49-68.
    15. Patrick Van Cayseele, 2004. "Financial consolidation and liquidity: prudential regulation and/or competition policy?," Working Paper Research 50, National Bank of Belgium.
    16. Bartelme, Dominick & Ziv, Oren, 2023. "JUE Insight: Firms and industry agglomeration," Journal of Urban Economics, Elsevier, vol. 133(C).
    17. 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.
    18. Gerald A. Carlino & Jake Carr & Robert M. Hunt & Tony E. Smith, 2010. "The agglomeration of R&D labs," Working Papers 10-33, Federal Reserve Bank of Philadelphia.
    19. Marcon, Eric & Puech, Florence, 2017. "A typology of distance-based measures of spatial concentration," Regional Science and Urban Economics, Elsevier, vol. 62(C), pages 56-67.
    20. Sugam Agarwal & Smruti Ranjan Behera, 2022. "Geographical concentration of knowledge and technology-intensive industries in India: empirical evidence from establishment-level analysis," Indian Economic Review, Springer, vol. 57(2), pages 513-552, December.

    More about this item

    Keywords

    Location; Retail-banking; Liberalization; Poverty; Spatial Statistics;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:sercdp:0058. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://cep.lse.ac.uk/_new/publications/serc-papers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.