Why Do Firms Switch Banks? Evidence from China

Wei Yin, Kent Matthews

Research output: Journal PublicationReview articlepeer-review

7 Citations (Scopus)

Abstract

This article uses a sample of matched firms-banks data in China over the period 1999–2012 to determine the drivers of firms switching behavior from one bank relationship to another. The results show that the principal driver of a switching action is the credit needs of the firm. The binding force of the Communist Party in state-owned banks and enterprises would suggest that switching should be a rare phenomenon in Chinese commercial relations. But switching occurs. The findings support the extant literature that transparent firms are able to switch more readily than opaque firms. The results also suggest that banks that develop their fee income services are more effective in locking-in their borrowers and that firms tend to switch from state-owned banks to smaller non-state owned banks. However, in other areas switching does not conform with the mainstream explanations.

Original languageEnglish
Pages (from-to)2040-2052
Number of pages13
JournalEmerging Markets Finance and Trade
Volume54
Issue number9
DOIs
Publication statusPublished - 15 Jul 2018
Externally publishedYes

Keywords

  • Chinese banks
  • Chinese firms
  • switching behavior

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance (all)

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