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Financial outreach and household financial constraint

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  • Yiyi Bai
  • Zhisheng Li
  • Huan Liu

Abstract

This paper analyses how financial outreach affects the probability of households having financial constraint (i.e. being ‘discouraged’ and ‘rejected’ for loan applications). We show that households residing in communities with more bank branches are less likely to be financially constrained. Using the distance to the closest fruit and vegetable (open) market as an instrument for financial outreach, we address the potential endogeneity problem and find our results remain robust. We further provide evidence on the negative relationship between the number of bank branches nearby and the probability of loan rejection, in particular for middle‐income young households.

Suggested Citation

  • Yiyi Bai & Zhisheng Li & Huan Liu, 2019. "Financial outreach and household financial constraint," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(5), pages 1503-1523, March.
    • Handle: RePEc:bla:acctfi:v:58:y:2019:i:5:p:1503-1523
    DOI: 10.1111/acfi.12450
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