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Why do firms switch banks? Evidence from China

Yin, Wei and Matthews, Kent 2018. Why do firms switch banks? Evidence from China. Emerging Markets Finance and Trade 54 , pp. 2040-2052. 10.1080/1540496X.2017.1343141

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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.

Item Type: Article
Date Type: Published Online
Status: Published
Schools: Business (Including Economics)
Publisher: Taylor & Francis
ISSN: 1540-496X
Date of Acceptance: 7 August 2017
Last Modified: 03 Oct 2018 10:45

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