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Accessibility to bank branches and entrepreneurial dynamics

New firm formation and capital structure of SMEs in Sweden amidst a changing banking landscape

Time: Mon 2021-12-20 10.00

Location: F3, Lindstedtsvägen 26, Stockholm

Video link: https://kth-se.zoom.us/j/65004680159

Language: English

Subject area: Business Studies

Doctoral student: Cynthia Sin Tian Ho , Fastighetsföretagande och finansiella system

Opponent: Professor Jonas Gabrielsson, Halmstad University

Supervisor: Professor Björn Berggren, Fastighetsföretagande och finansiella system

QC 211125

Abstract

The overall objective of this thesis is to develop a better understanding of the impact of accessibility to bank branches on new firm formation and on the capital structure of small and medium-sized enterprises (SMEs) in Sweden. In this thesis, the accessibility to bank branches is measured by two proxies that are weighted by two different types of population—the labour population and the firm population. By weighing the distance by the population, the accessibility to bank branch measures account for the distribution of the population within the municipality. Furthermore, spatial effects are included in the models in Chapters 2, 3, and 4 to account for the possibility that entrepreneurs in a municipality may travel to obtain financial services from the banks in neighbouring municipalities. The analysis in Chapter 2 provides no evidence that the relationship between the distance to banks and new firm formation varies spatially. This means that the accessibility to bank branches has a negative association with new firm formation, regardless of the location. The findings in Chapter 3 show that an increase in the weighted mean distance to the nearest bank branches negatively affects new firm formation. The findings in Chapter 4 also show that the effects of the accessibility to the bank branches’ proxy weighted by the labour population have a negative effect on new firm formation in the ‘education, health, and others’ industry, while the effects of the accessibility to bank branches’ proxy weighted by the firm population have a negative effect on new firm formation in capital- intensive industries, such as manufacturing, transport and communications, and education, health, and others industries. The final chapter focuses on the impact of the accessibility to bank branches on the capital structure of SMEs. The findings show that an increase in the distance to the bank branch has a significant negative impact on the total and short-term leverage of SMEs. Overall, the results of this thesis are relevant to various stakeholders, such as policy-makers, in making finance more accessible to current and prospective entrepreneurs. For example, the lack of accessibility to government loans and grants, especially in rural regions, is making some regions vulnerable to becoming bank deserts. The existing infrastructures in a municipality, such as the supermarket, can also help to take over some services the closed bank branches previously provided, such as cash deposits and short-term loans. 

urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-305224

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Last changed: Dec 19, 2021