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Corporate main bank decision


  • Höwer, Daniel


Do firms select their main bank relationship according to their risk or risk preferences? Relationship banking is attractive for high risk firms since it improves their access to finance and provides liquidity insurance. Low risk firms instead may not want to bear the additional costs. I employ a nested logit model to study the determinants of the main bank relationship decision by newly established German firms. I find that firms that ask for bank support in case of financial distress are more likely to choose a relationship-oriented bank, such as a public or cooperative bank. Cost sensitive firms are more likely to choose a private bank. But I find no evidence that firms select a bank according to ex ante risk. Transaction oriented banks are not able to attract low risk firms.

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  • Höwer, Daniel, 2013. "Corporate main bank decision," ZEW Discussion Papers 13-018, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:13018

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    More about this item


    Relationship Banking; Start-up; Entrepreneurship; Financing Choice;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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