Estimating switching costs: the case of banking

Kim, Moshe; Kliger, Doron; Vale, Bent

doi:10.1016/s1042-9573(02)00005-0

Cited by 305 publications

(170 citation statements)

References 30 publications

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“…Kim et al (2003) claim that switching costs mainly arise from asymmetric information between borrowers and lenders incurred when economic agents change their suppliers. The disadvantage for borrowers seeking external funding between small firms and financiers is highlighted by Keasey and Waterson, (1993) and Berger and Udell, (1998).…”

Section: Lending Relationship With Asymmetric Informationmentioning

confidence: 99%

“…Switching costs, which arise from the asymmetry of information between firms and banks, act as the glue for the bank-firm relationship (Shy, 2002;Kim et al, 2003;Vesala, 2007). The confidentiality associated with the customer-loan relationship allows banks to exploit their informational advantage over competitors and lock-in their incumbent customers to earn higher positive expected profits on repeated lending.…”

Section: Introductionmentioning

confidence: 99%

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Why Do Firms Switch Banks? Evidence from China

Yin

Matthews

2018

Emerging Markets Finance and Trade

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Section: Lending Relationship With Asymmetric Informationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Why Do Firms Switch Banks? Evidence from China

Yin

Matthews

2018

Emerging Markets Finance and Trade

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“…In the event of switching, borrowers face "informational" switching costs and "transactional" switching costs (see e.g. Bouckaert and Degryse, 2004;Degryse and Ongena, 2004;or Kim et al, 2003;Klemperer (1995) provides a review of switching costs). 4 These costs may be heterogeneous across firms.…”

Section: Ii2 Borrower Heterogeneity: Modifications Of the Trade-off mentioning

confidence: 99%

SMES and Bank Lending Relationships: The Impact of Mergers

2004

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This paper studies the impact of bank mergers on firm-bank lending relationships using information from individual loan contracts in Belgium. We analyse the effects of bank mergers on the probability of borrowers maintaining their lending relationships and on their ability to continue tapping bank credit. The Belgian financial environment reflects a number of interesting features: high banking sector concentration; "in-market" mergers with large target banks; importance of large banks in providing external finance to SMEs; and low numbers of bank lending relationships maintained by SMEs. We find that bank mergers generate short-term and longer-term effects on borrowers' probability of losing a lending relationship. Mergers also have heterogeneous impacts across borrower types, including borrowers of acquiring and target banks, borrowers of differing size, and borrowers with single versus multiple relationships. Firms borrowing from acquiring banks are less likely to lose their lending relationship, while target bank borrowers are more likely to lose their relationship. Overlap borrowers -borrowing from two of the merging banks -are less likely to lose their relationship than firms borrowing from only one of the merging banks or firms borrowing from nonmerging banks.

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“…Merger and acquisition activity, the presence of scale economies, and the role of regulation all appear to have had a role. As suggested by Kim et al (2003), movements in market shares can also be used to infer (and measure) switching costs. By making it costly for consumers to change banks, and consequently more difficult for a new bank to acquire new clients, switching costs tend to limit entry as well as shuffle in market shares.…”

Section: Panel Unit Root Tests For Cross-sectionally Dependent Panelsmentioning

confidence: 99%

“…Specifically, in the spirit of Kim et al (2003), a dynamic in market shares could be interpreted as an indirect signal of a reduction of switching costs that makes it easier for consumers to move to different banks and, consequently, for banks to acquire new customers.…”

Section: Introductionmentioning

confidence: 99%

Unit roots and the dynamics of market shares: an analysis using an Italian banking micro-panel

Giannetti

2014

Empir Econ

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The paper proposes the use of panel data unit-root tests to assess market-share instability in order to obtain indications of industry dynamics. The idea is to consider movements in market shares as much more than mere elements of the market structure. In fact, these movements reflect conduct that arises from that market. If shares are mean-reverting, then firm actions have only a temporary effect on shares. On the other hand, if shares are evolving, as signaled by the presence of unit roots, then any gain in shares with respect to the competitors is long term.

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Estimating switching costs: the case of banking

Cited by 305 publications

References 30 publications

Why Do Firms Switch Banks? Evidence from China

Why Do Firms Switch Banks? Evidence from China

SMES and Bank Lending Relationships: The Impact of Mergers

Unit roots and the dynamics of market shares: an analysis using an Italian banking micro-panel

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