Bank Branch Proximity, Financial Flexibility and Corporate Liquidity Management

66 Pages Posted: 1 Sep 2015 Last revised: 28 Feb 2019

See all articles by Nhan Le

Nhan Le

Australian National University

Phong T. H. Ngo

Australian National University (ANU)

Date Written: February 26, 2019

Abstract

Firms hold less cash (i.e. internal-liquidity) when their local bank branching network is dense. The effect strengthens for small, opaque and financially constrained firms. Further, it weakens with distance and strengthens with urban vibrancy. Finally, firms located in dense local branch networks enjoy better access to bank credit lines with looser covenants (i.e. external-liquidity) and are able to mitigate investment contractions during economic downturns. Using a quasi-natural experiment, we confirm the causality of our results. Taken together, these findings suggest an economic link between financial agglomeration, financial flexibility and the real economy.

Keywords: Cash holdings; Bank branching network; Geographic proximity

JEL Classification: G21, G33, G32, E51

Suggested Citation

Le, Nhan and Ngo, Phong T. H., Bank Branch Proximity, Financial Flexibility and Corporate Liquidity Management (February 26, 2019). Available at SSRN: https://ssrn.com/abstract=2653483 or http://dx.doi.org/10.2139/ssrn.2653483

Nhan Le

Australian National University ( email )

26C Kingsley Street
Acton, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://sites.google.com/a/colorado.edu/nhan-le/

Phong T. H. Ngo (Contact Author)

Australian National University (ANU) ( email )

RSFAS, College of Business and Economics
Australian National University
Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 1079 (Phone)

HOME PAGE: http://cbe.anu.edu.au/people/rsfas/phong-ngo/

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