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Why Do Firms Switch Their Main Bank? - theory and evidence from Ukraine

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Author Info

  • Stephan, Andreas

    ()
    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Tsapin, Andriy

    ()
    (European University Viadrina)

  • Talavera, Oleksandr

    (Aberdeen Business School)

Abstract

We examine why firms change their main bank and how this affects loans, interest payments and firm performance after switching. Using unique firm-bank matched Ukrainian data, the treatment effect estimates suggest that more transparent and riskier companies are more likely to switch their main bank. Importantly,main bank power, measured by equity holdings, appears to be one of the main drivers of firm switching behavior. Furthermore, we find that firms have lower performance after changing their main bank as they have to contend with higher interest payments.

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Bibliographic Info

Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 180.

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Length: 29 pages
Date of creation: 04 Jun 2009
Date of revision:
Handle: RePEc:hhs:cesisp:0180

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Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/
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Keywords: financial constraints; switching; main bank power; firm performance; Ukraine;

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