Why do firms switch banks? evidence from China

Why do firms switch banks? evidence from China
Document type
Working Paper
Author(s)
Yin, Wei; Matthews, Kent
Publisher
Cardiff Business School
Date of publication
1 September 2014
Series
Working Paper No. E2014/17
Subject(s)
Trends: economic, social and technology trends affecting business
Collection
Business and management
Material type
Reports

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This paper uses a sample of matched data of firms-banks in China over the period 1999-2012 to determine the drivers of firms switching behaviour from one bank relationship to another. The findings conform to the extant literature and therefore indicate that the switching behaviour of Chinese firms is no different to firms elsewhere. The results show that the principal driver of a switching action is the credit needs of the firm and a mixture of firm and bank characteristics. The findings support the extant literature that less opaque firms are able to switch more readily than opaque firms. The results also suggest that banks that develop there fee income services are more effective in locking-in their borrowers.

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