Main Bank Power, Switching Costs, and Firm Performance: Theory and Evidence from Ukraine

Andreas Stephan, Andriy Tsapin, Oleksandr Talavera
2012 Emerging markets finance & trade  
We examine firms' motivation to change their main bank and how this switch affects loans, interest payments and firm performance after switching. Applying treatment effect analysis on unique firm-bank matched Ukrainian data, we find that larger and highly leveraged companies are more likely to switch their main bank. Importantly, firms tend to switch to a new main bank which holds a higher share of equity in the firm and thereby has stronger power. The results also suggest that firms after
more » ... hing obtain additional access to bank loans but have on average lower profits due to increased interest payments.
doi:10.2753/ree1540-496x480205 fatcat:mydaovrm7ffhvf7zs2hbmmkgli