Geographical accessibility to bank branches and its relationship to new firm formation in Sweden via multiscale geographically weighted regression

Abstract

AbstractThe geographical accessibility to banks and its relationship with new firm formation can vary across space due to spatial contexts. With increasing bank branch closures in Sweden, it is even more critical to understand where interventions are needed and at which scale, to implement effective policy. Thus, spatial context is incorporated into the analysis with the use of the multiscale geographically weighted regression (MGWR) model. A two-stage least squares (2SLS) model is employed in which two instrumental variables are utilised to instrument the proximity to the nearest bank branch in 2013. The MGWR results show that the geographical distance to the nearest bank branch has a negative association with new firm formation across all Swedish municipalities. The results also show that the relationship between the geographical distance to bank branches and new formation is not spatially varying across space. A policy implication from the analysis shows it is ideal to focus on the geographical accessibility to bank branches as it would continue to play an important role in the financing of new firms, regardless of the location.