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

Author

Listed:
  • Andreas Stephan

    () (Jonkoping International Business School)

  • Oleksandr Talavera

    () (School of Economics, University of East Anglia)

  • Andriy Tsapin

    (Ostroh Academy)

Abstract

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.

Suggested Citation

  • Andreas Stephan & Oleksandr Talavera & Andriy Tsapin, 2011. "Main bank power, Switching Costs, and Firm Performance. Evidence from Ukraine," University of East Anglia Applied and Financial Economics Working Paper Series 026, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:aepppr:2011_26
    as

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    More about this item

    Keywords

    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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