The determinants and profitability of switching costs in Chinese banking

Wei Yin and Kent Matthews

No E2014/13, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: Using a sample of 151 banks over the period 2003 to 2010, this paper estimates a model that examines the effect of switching costs in the Chinese loan market on banking profitability. In keeping with the extant empirical literature it reports a positive relationship between bank profitability and switching costs. Furthermore it reports the estimation of a systems model of switching costs and profitability. The main result is that bank size measured by total assets is has a complex relationship with switching costs. Competition between small banks creates the incentive for lock-in and increased switching costs whereas very large banks are less exercised by lock-in and switching costs. The study also finds that concentration has a negative relationship with switching costs and profitability, confirming the accepted view that the large state-owned banks are concerned with social as well as profit objectives.

Keywords: Chinese banking; switching costs; bank profitability (search for similar items in EconPapers)
JEL-codes: C51 G21 L14 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-07
New Economics Papers: this item is included in nep-ban, nep-com, nep-eff and nep-tra
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Related works:
Journal Article: The determinants and profitability of switching costs in Chinese banking (2016)
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