Bank branches expansion, efficiency and local economic growth

This study investigates the effects of branch network expansion and geographical strategies on the cost efficiency of Italian cooperative banks between 2006 and 2013. Results indicate that, except for banks with a more diversified product offering, expansion has a negative impact on efficiency, which is exacerbated by increased distance between the headquarters and branches. Any positive effect due to a larger bank size is neutralized by the branch expansion. Efficient local banks and a larger credit availability boost the local economy, while a bank structural change by a branch expansion generates a negative effect in terms of local economic development.