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Main bank power, Switching Costs, and Firm Performance. Evidence from Ukraine

  • Andreas Stephan

    ()

    (Jonkoping International Business School)

  • Oleksandr Talavera

    ()

    (School of Economics, University of East Anglia)

  • Andriy Tsapin

    (Ostroh Academy)

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

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File URL: http://www.uea.ac.uk/menu/depts/eco/research/RePEc/uea/papers_pdf/UEA-AFE-026.pdf
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Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series University of East Anglia Applied and Financial Economics Working Paper Series with number 026.

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Date of creation: 28 Mar 2011
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Handle: RePEc:uea:aepppr:2011_26
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