New Research on the Importance of Local Banks to Rural Communities!

Access to financial capital is vital for the sustainability of the local business sector. Recent

research on the restructuring of the financial industry from local owned banks to interstate conglomerates

has raised questions about the impact on local economies, especially in rural areas. We examine the im-

pact of bank ownership concentration on business formations, continuations, and deaths in metropolitan,

micropolitan, and rural U.S. counties. Using limited-access Census data, we find that local bank

concentration is positively related to business births and deaths, or churn, in rural counties, but the opposite

effects occur in metropolitan areas.