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Why Do Firms Switch Their Main Bank?: Theory and Evidence from Ukraine

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  • Andreas Stephan
  • Andriy Tsapin
  • Oleksandr Talavera

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.

Suggested Citation

  • Andreas Stephan & Andriy Tsapin & Oleksandr Talavera, 2009. "Why Do Firms Switch Their Main Bank?: Theory and Evidence from Ukraine," Discussion Papers of DIW Berlin 894, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp894
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    References listed on IDEAS

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    Cited by:

    1. Yin, Wei & Matthews, Kent, 2014. "The determinants and profitability of switching costs in Chinese banking," Cardiff Economics Working Papers E2014/13, Cardiff University, Cardiff Business School, Economics Section.
    2. Yin, Wei & Matthews, Kent, 2014. "Why do firms switch banks? Evidence from China," Cardiff Economics Working Papers E2014/17, Cardiff University, Cardiff Business School, Economics Section.

    More about this item

    Keywords

    Financial constraints; switching; main bank power; firm performance; Ukraine;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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