The economic impact of changes in local bank presence

Figures & data

Table 1. Variable definitions.

(A) County-level dependent and control variables
UNEMPL	Unemployment rate
UNEMPL.INCR	Year-to-year growth in the unemployment rate
NEW.COMP	Number of new companies registered in a given year divided by a county’s population (per 100 people)
HHI	Local banking market’s concentration (Herfindahl–Hirschman index, where the number of a bank’s local branches denotes its significance)
MAX.10.BANKS	Binary variable that takes the value of 1 for counties with no more than 10 banks operating in their area, and 0 otherwise
WAGES	Average salary in a county in relation to the country’s average salary
GRADUATES	People graduating from universities in a given year divided by a county’s population (per 100 people)
POP.DENS	Population density (hundreds/km^2)
MEAN.ROS	Mean return on sales of small and medium-sized enterprises (SMEs) located in a county
MEAN.SALES.GR	Mean growth rate of sales of SMEs located in a county
(B) Variables describing the instability of a banking market in a county
BRANCH.INCR, BRANCH.COOP.INCR, BRANCH.CB.INCR	Year-to-year percentage increase in the number of all bank branches, cooperative bank branches and commercial bank branches respectively that operated in a given county
BANKS.INCR, BANKS.COOP.INCR, BANKS.CB.INCR	Year-to-year increase in the number of banks, cooperative banks and commercial banks respectively that operated in a given county^a
ENTRIES, COOP.ENTRIES, CB.ENTRIES	Number of all banks, cooperative banks and commercial banks respectively that opened their first branch in a given county and year^a
EXITS, COOP.EXITS, CB.EXITS	Number of all banks, cooperative banks and commercial banks respectively that closed all their branches in a given county and year^a
ACQ.BANK, ACQ.BANK.COOP, ACQ.BANK.CB	Number of banks, cooperative banks and commercial banks respectively that operated in a given county and were acquired by other entities in a given year
ACQ.BRANCH, ACQ.BRANCH.COOP, ACQ.BRANCH.CB	Number of branches of all banks, cooperative banks and commercial banks respectively that operated in a given county and were acquired by other entities in a given year
(C) Small and medium-sized enterprises’ (SMEs) characteristics
DEBT.GR	Yearly increase in bank and long-term debt to total assets at the beginning of a year in constant prices
FIN.COST	Financial expenses to average assets per year
INVEST	Growth rate of tangible fixed assets at constant prices
LNA	Natural logarithm of total assets at constant prices
CASH	Ratio of cash and cash equivalent to total assets
TAT	Ratio of sales to total assets
COLLAT	Ratio of tangible fixed assets to total assets
ROS	Gross profit/loss to sales
LT.LIAB	Ratio of non-current liabilities to total assets
EQUITY	Ratio of shareholders’ funds to total assets
EBIT.S	Operating profit/loss to sales
FIXA	Ratio of fixed assets to total assets
YOUNG	Variable that takes the value of 1 if a firm is not more than five years old, and 0 otherwise

Note: ^aTo eliminate the effect of bank mergers, banks merging in period t are already treated as a single institution in year t – 1, while calculating the growth rate of bank numbers and the number of bank exits/entries in year t.

Table 2. Impact of increases in the number of bank branches on counties.

	(1)	(2)	(3)	(4)
	UNEMPL.INCRt		NEW.COMPt
BRANCH.INCRt–1	–0.0600*** (0.0175)		–0.292 (0.309)
BRANCH.COOP.INCRt–1		–0.00527* (0.00305)		0.00911 (0.0391)
BRANCH.CB.INCRt–1		–0.0259** (0.0128)		–0.135 (0.105)
Observations	1893	1846	1893	1846
Counties	379	372	379	372
Hansen	14.21	20.77	9.787	20.38
Hansen (p-value)	0.163	0.291	0.459	0.312

Notes: The set of unreported explanatory variables includes year dummies, industry dummies and county-level controls (HHI, MAX.10.BANKS, GRADUATES, POP.DENS, MEAN.ROS, MEAN.SALES.GR, WAGES and a lagged dependent variable). The variables describing instability of the local banking market are treated as endogenous.

*, **, ***Statistical significance at the 10%, 5% and 1% levels respectively. Robust standard errors are shown in parentheses.

Table 3. Impact of increases in the number of bank branches on small and medium-sized enterprises (SMEs).

	(1)	(2)	(3)	(4)	(5)	(6)
	DEBT.GRt		FIN.COSTt		INVESTt
BRANCH.INCRt–1	0.00348 (0.00412)		0.000308 (0.000823)		0.00740 (0.0296)
BRANCH.COOP.INCRt–1		0.00183* (0.00106)		–1.67e–05 (0.000236)		0.0130* (0.00751)
BRANCH.CB.INCRt–1		0.000872 (0.00228)		–0.000647 (0.000423)		–0.0175 (0.0156)
Observations	154,399	152,711	119,353	118,004	146,113	144,508
Firms	41,733	41,309	34,396	34,039	39,569	39,163
Hansen	16.85	17.01	0.927	0.404	16.38	15.62
Hansen (p-value)	0.206	0.199	0.336	0.525	0.229	0.270

Note: The set of unreported explanatory variables includes county-level controls (HHI, MAX.10.BANKS, GRADUATES, POP.DENS, UNEMPL and WAGES), year dummies, industry dummies, a lagged dependent variable and other firm-level controls, i.e.: (a) LNA, CASH, TAT, COLLAT, ROS and LT.LIAB in the case of specifications (1) and (2); (b) LNA, CASH, TAT, COLLAT, ROS and EQUITY in the case of specifications (3) and (4); and (c) LNA, CASH, TAT, LT.LIAB, EBIT.S and FIX.A in the case of specifications (5) and (6). All firm-level control variables, except for LNA, were lagged by one period.

*, **, ***Statistical significance at the 10%, 5% and 1% levels respectively. Robust standard errors are shown in parentheses.

Table 4. Impact of bank entries/exits on counties

	UNEMPL.INCRt		NEW.COMPt
(A) Increases in the number of banks	(1)	(2)	(3)	(4)
BANKS.INCRt–1	–0.00142 (0.00123)		–0.0303 (0.0289)
BANKS.COOP.INCRt–1		–0.00378** (0.00188)		0.0161 (0.0400)
BANKS.CB.INCRt–1		–0.00166 (0.00120)		–0.0299 (0.0256)
Observations	1893	1893	1893	1893
Counties	379	379	379	379
Hansen	14.39	21.07	11.88	21.72
Hansen (p-value)	0.156	0.276	0.293	0.245
(B) Bank entries	(5)	(6)	(7)	(8)
ENTRIESt–1	0.00585 (0.00422)		–0.0617 (0.106)
COOP.ENTRIESt–1		–0.00350 (0.00359)		–0.0476 (0.0913)
CB.ENTRIESt–1		–0.00367** (0.00183)		0.0726 (0.0791)
Observations	1893	1893	1893	1893
Counties	379	379	379	379
Hansen	5.126	25.91	11.34	8.828
Hansen (p-value)	0.645	0.102	0.125	0.265
(C) Bank exits	(9)	(10)	(11)	(12)
EXITSt–1	–0.00109 (0.00477)		–0.0621 (0.0823)
COOP.EXITSt–1		0.0151* (0.00836)		–0.0968 (0.125)
CB.EXITSt–1		–0.00228 (0.00446)		0.0716 (0.0938)
Observations	1893	1893	1893	1893
Counties	379	379	379	379
Hansen	13.27	25.32	7.869	12.16
Hansen (p-value)	0.209	0.116	0.642	0.839

Note: The set of unreported explanatory variables includes year dummies, industry dummies and county-level controls (HHI, MAX.10.BANKS, GRADUATES, POP.DENS, MEAN.ROS, MEAN.SALES.GR, WAGES and a lagged dependent variable). The variables describing instability of the local banking market are treated as endogenous.

*, **, *** Statistical significance at the 10%, 5% and 1% levels respectively. Robust standard errors are shown in parentheses.

Table 5. Impact of bank entries/exits on small and medium-sized enterprises (SMEs).

	DEBT.GRt		FIN.COSTt		INVESTt
(A) Increases in the number of banks	(1)	(2)	(3)	(4)	(5)	(6)
BANKS.INCRt–1	–0.000361 (0.000275)		–0.000262*** (5.62e–05)		–0.000194 (0.00212)
BANKS.COOP.INCRt–1		0.000411 (0.000447)		–0.000204** (8.62e–05)		0.00382 (0.00377)
BANKS.CB.INCRt–1		–0.000677** (0.000325)		–0.000285*** (6.70e–05)		–0.00179 (0.00248)
Observations	154,399	154,399	119,353	119,353	146,113	146,113
Firms	41,733	41,733	34,396	34,396	39,569	39,569
Hansen	16.83	16.85	0.866	0.879	16.38	16.38
Hansen (p-value)	0.207	0.206	0.352	0.349	0.229	0.229
(B) Bank entries	(7)	(8)	(9)	(10)	(11)	(12)
ENTRIESt–1	–0.000378 (0.000310)		–0.000350*** (6.72e–05)		0.000366 (0.00239)
COOP.ENTRIESt–1		0.000748 (0.000485)		–0.000183* (9.45e–05)		0.00117 (0.00410)
CB.ENTRIESt–1		–0.000985** (0.000397)		–0.000438*** (8.68e–05)		–4.89e–05 (0.00303)
Observations	154,399	154,399	119,353	119,353	146,113	146,113
Firms	41,733	41,733	34,396	34,396	39,569	39,569
Hansen	16.83	16.87	0.964	0.963	16.37	16.37
Hansen (p-value)	0.207	0.205	0.326	0.326	0.230	0.230
(C) Bank exits	(13)	(14)	(15)	(16)	(17)	(18)
EXITSt–1	7.34e–05 (0.000449)		–3.39e–05 (8.63e–05)		0.000905 (0.00349)
COOP.EXITSt–1		0.000267 (0.000721)		2.26e–05 (0.000141)		–0.00987 (0.00616)
CB.EXITSt–1		–1.80e–05 (0.000560)		–6.08e–05 (0.000109)		0.00594 (0.00419)
Observations	154,399	154,399	119,353	119,353	146,113	146,113
Firms	41,733	41,733	34,396	34,396	39,569	39,569
Hansen	16.84	16.84	0.938	0.926	16.37	16.31
Hansen (p-value)	0.207	0.207	0.333	0.336	0.230	0.233

Note: The set of unreported explanatory variables includes county-level controls (HHI, MAX.10.BANKS, GRADUATES, POP.DENS, UNEMPL and WAGES), year dummies, industry dummies, a lagged dependent variable and other firm-level controls, i.e.: (a) LNA, CASH, TAT, COLLAT, ROS and LT.LIAB in the case of specifications (1)–(2), (7)–(8) and (13)–(14); (b) LNA, CASH, TAT, COLLAT, ROS and EQUITY in the case of specifications (3)–(4), (9)–(10) and (15)–(16); and (c) LNA, CASH, TAT, LT.LIAB, EBIT.S and FIX.A in the case of specifications (5)–(6), (11)–(12) and (17)–(18). All firm-level control variables, except for LNA, were lagged by one period.

*, **, ***Statistical significance at the 10%, 5% and 1% levels respectively. Robust standard errors are shown in parentheses.

Table 6. Impact of changes in bank ownership on counties.

	UNEMPL.INCRt		NEW.COMPt
(A) Ownership changes measured at the bank level	(1)	(2)	(3)	(4)
ACQ.BANKt–1	–0.00375 (0.00345)		0.0170*** (0.00644)
ACQ.BANK.COOPt–1		–0.00216 (0.00839)		0.0124 (0.0258)
ACQ.BANK.CBt–1		–0.00376 (0.00347)		0.0172*** (0.00648)
Observations	1514	1514	1514	1514
Counties	379	379	379	379
Hansen	3.555	3.593	3.476	3.474
Hansen (p-value)	0.169	0.166	0.176	0.176
(B) Ownership changes measured at the branch level	(5)	(6)	(7)	(8)
ACQ.BRANCHt–1	–0.000394 (0.000306)		0.00569*** (0.00111)
ACQ.BRANCH.COOPt–1		0.00201 (0.00488)		–0.00205 (0.00765)
ACQ.BRANCH.CBt–1		–0.000403 (0.000311)		0.00573*** (0.00113)
Observations	1514	1514	1514	1514
Counties	379	379	379	379
Hansen	3.019	3.073	3.704	3.658
Hansen (p-value)	0.221	0.215	0.157	0.161

Note: The set of unreported explanatory variables includes year dummies, industry dummies and county-level controls (HHI, MAX.10.BANKS, GRADUATES, POP.DENS, MEAN.ROS, MEAN.SALES.GR, WAGES and a lagged dependent variable). The variables describing instability of the local banking market are treated as exogenous.

*, **, ***Statistical significance at the 10%, 5% and 1% levels respectively. Robust standard errors are shown in parentheses.

Table 7. Impact of changes in bank ownership on small and medium-sized enterprises (SMEs).

	DEBT.GRt		FIN.COSTt		INVESTt
(A) Ownership changes measured at the bank level	(1)	(2)	(3)	(4)	(5)	(6)
ACQ.BANKt–1	0.000239 (0.000717)		0.000363*** (0.000134)		–0.00182 (0.00529)
ACQ.BANK.COOPt–1		0.000208 (0.00401)		0.00103 (0.000791)		0.000915 (0.0331)
ACQ.BANK.CBt–1		0.000240 (0.000727)		0.000343** (0.000136)		–0.00190 (0.00537)
Observations	124,214	124,214	95,939	95,939	117,366	117,366
Firms	40,558	40,558	32,928	32,928	38,358	38,358
Hansen	16.73	16.73	0.721	0.710	14.13	14.13
Hansen (p-value)	0.160	0.160	0.396	0.399	0.293	0.292
(B) Ownership changes measured at the branch level	(7)	(8)	(9)	(10)	(11)	(12)
ACQ.BRANCHt–1	–9.69e–06 (3.05e–05)		–5.91e–05*** (8.71e–06)		8.27e–05 (0.000275)
ACQ.BRANCH.COOPt–1		2.08e–05 (0.00218)		0.000224 (0.000310)		–0.00258 (0.0144)
ACQ.BRANCH.CBt–1		–9.70e–06 (3.05e–05)		–5.91e–05*** (8.72e–06)		8.30e–05 (0.000275)
Observations	124,214	124,214	95,939	95,939	117,366	117,366
Firms	40,558	40,558	32,928	32,928	38,358	38,358
Hansen	16.73	16.73	0.720	0.712	14.11	14.11
Hansen (p-value)	0.160	0.160	0.396	0.399	0.294	0.294

Note: The set of unreported explanatory variables includes county-level controls (HHI, MAX.10.BANKS, GRADUATES, POP.DENS, UNEMPL and WAGES), year dummies, industry dummies, a lagged dependent variable and other firm-level controls, i.e.: (a) LNA, CASH, TAT, COLLAT, ROS and LT.LIAB in the case of specifications (1)–(2) and (7)–(8); (b) LNA, CASH, TAT, COLLAT, ROS and EQUITY in the case of specifications (3)–(4) and (9)–(10); and (c) LNA, CASH, TAT, LT.LIAB, EBIT.S and FIX.A in the case of specifications (5)–(6) and (11)–(12). All firm-level control variables, except for LNA, were lagged by one period.

*, **, ***Statistical significance at the 10%, 5% and 1% levels respectively. Robust standard errors are shown in parentheses.