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How Do Individuals Choose Banks? An Application to Household Level Data from Turkey

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Author Info

  • Ardic Oya Pinar

    ()
    (Bogazici University)

  • Yuzereroglu Uygar

    ()
    (Turkcell)

Abstract

This paper uses a multinomial probit model to analyze individuals' choice of banks based on the types of banking services they use, their own characteristics, and their own perceptions about important factors in banking. Previous studies on this topic, which are limited in number, concentrate on the U.S. where financial markets are well-developed. This analysis uses a unique individual level data set from a nation-wide survey implemented after the 2001 crisis in Turkey, of which one major component was bank failures. Hence, it provides the first set of econometric evidence on the topic in an emerging market context. The study groups banks into three categories: public, large private and small private banks, among which the latter is perceived to be the potentially risky group. Investigating individuals' choice among these three types, the paper uncovers that while individuals tend to prefer small private banks on the basis of high interest rates, they tend to avoid them on the basis of trust. Additionally, the paper finds that the choice between public and large private banks mainly depends on structural factors. These results could be of potential use to policymakers in regulating the banking sector and to bank management in channeling marketing effort.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 9 (2009)
Issue (Month): 1 (June)
Pages: 1-26

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Handle: RePEc:bpj:bejeap:v:9:y:2009:i:1:n:22

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  1. Gencay, Ramazan & Selcuk, Faruk, 2006. "Overnight borrowing, interest rates and extreme value theory," European Economic Review, Elsevier, vol. 50(3), pages 547-563, April.
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  7. C. Emre Alper, 2001. "The Turkish Liquidity Crisis of 2000: What Went Wrong..," Working Papers 2001/11, Bogazici University, Department of Economics.
  8. Oya Pınar Ardıc & Faruk Selcuk, 2006. "The dynamics of a newly floating exchange rate: the Turkish case," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 931-941.
  9. Boczar, Gregory E, 1978. "Competition between Banks and Finance Companies: A Cross Section Study of Personal Loan Debtors," Journal of Finance, American Finance Association, vol. 33(1), pages 245-58, March.
  10. Fry, Joseph N, et al, 1973. "Customer Loyalty to Banks: A Longitudinal Study," The Journal of Business, University of Chicago Press, vol. 46(4), pages 517-25, October.
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