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Main Bank Power, Switching Costs, and Firm Performance: Theory and Evidence from Ukraine

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Author Info

  • STEPHAN, ANDREAS

    ()
    (Jönköping International Business School, CESIS and DIW Berlin)

  • TSAPIN , ANDRIY

    ()
    (National University of Ostroh Academy, Ukraine)

  • TALAVERA, OLEKSANDR

    (University of East Anglia)

Abstract

We examine firms’ motivation to change their main bank and how this switch affects loans, interest payments, and firm performance. Applying treatment effect analysis to unique firm-bank matched Ukrainian data, we find that larger and more highly leveraged companies are more likely to switch their main bank. Importantly, firms tend to switch to a new main bank that holds a higher share of equity in the firm and thus has stronger power. The results also suggest that after switching, firms obtain additional access to bank loans but, on average, have lower profits due to bigger interest payments.

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Bibliographic Info

Paper provided by Jönköping International Business School in its series JIBS Working Papers with number 2011-7.

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Length: 26 pages
Date of creation: 24 Aug 2011
Date of revision:
Handle: RePEc:hhb:hjacfi:2011_007

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Postal: Jönköping International Business School, P.O. Box 1026, SE-551 11 Jönköping, Sweden
Phone: 036-157700
Fax: 036-165069
Web page: http://www.jibs.hj.se/
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Related research

Keywords: financial constraints; switching; main bank power; firm performance; Ukraine.;

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