How Do Individuals Choose Banks? An Application to Household Level Data from Turkey
AbstractThis 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 InfoPaper provided by Bogazici University, Department of Economics in its series Working Papers with number 2007/26.
Date of creation: 2007
Date of revision:
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Other versions of this item:
- Ardic Oya Pinar & Yuzereroglu Uygar, 2009. "How Do Individuals Choose Banks? An Application to Household Level Data from Turkey," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-26, June.
- Ardic, Oya Pinar & Yuzereroglu, Uygar, 2007. "How Do Individuals Choose Banks? An Application to Household Level Data from Turkey," MPRA Paper 6096, University Library of Munich, Germany.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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