Out of Sight, Out of Mind: Nearby Branch Closures and Small Business Growth

29 Pages Posted: 25 Feb 2025

See all articles by Benjamin Ranish

Benjamin Ranish

Board of Governors of the Federal Reserve System

Andrea Stella

Board of Governors of the Federal Reserve System

Jeffery Y. Zhang

University of Michigan Law School

Date Written: February 25, 2025

Abstract

Since 2010, the total number of commercial bank branches in the United States has fallen by about 20%. Do branch closures meaningfully affect economic activity? We investigate the impact of branch closures on small businesses, whose credit access may be facilitated through local relationships with bankers. We use exogenous variation in closures related to mergers and acquisitions to show that closures of nearby branches decrease small business employment growth and entry. Our results are robust to variations in our measure of employment, proximity, and construction of the instrument. Altogether, our analysis highlights the importance of local branches to small businesses.

Keywords: JEL classifications: E32, E44. D22, D53, G21, J23, L25 Credit access, small businesses, firm growth, branch closures, bank mergers, Longitudinal Business Database

Suggested Citation

Ranish, Benjamin and Stella, Andrea and Zhang, Jeffery Y., Out of Sight, Out of Mind: Nearby Branch Closures and Small Business Growth (February 25, 2025). U of Michigan Law & Econ Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=5153861 or http://dx.doi.org/10.2139/ssrn.5153861

Benjamin Ranish

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Andrea Stella (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jeffery Y. Zhang

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

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