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Why Do Firms Switch Their Main Bank?: Theory and Evidence from Ukraine

Andreas Stephan (), Andriy Tsapin and Oleksandr Talavera

No 894, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We examine why firms change their main bank and how this affects loans, interest payments and firm performance after switching. Using unique firm-bank matched Ukrainian data, the treatment effect estimates suggest that more transparent and riskier companies are more likely to switch their main bank. Importantly, main bank power, measured by equity holdings, appears to be one of the main drivers of firm switching behavior. Furthermore, we find that firms have lower performance after changing their main bank as they have to contend with higher interest payments.

Keywords: Financial constraints; switching; main bank power; firm performance; Ukraine (search for similar items in EconPapers)
JEL-codes: G21 G30 G32 (search for similar items in EconPapers)
Pages: 25 p.
Date: 2009
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-eff
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