When the Last Branch Closes: The Impact of Bank Desertification on Local Firm Growth

This paper examines the effects of bank desertification, defined as the closure of the last local branch, on firm growth, drawing on proprietary and publicly available data at the municipal level in Italy. Our robust results show that desertification is associated with a significant decline in firm growth, particularly in areas dominated by smaller and less innovative firms. In contrast, broadband access, used as a proxy for access to digital and alternative financing, does not appear to significantly mitigate these effects. These findings suggest that physical proximity to banking services continues to play an important role in supporting firm growth and local economic development.