Corporate Choice of Banks: Decision Factors, Process and Responsibility - First Evidence

Finance & Accounting

Speaker:Gunseli Tumer-Alkan, Vrije Universiteit Amsterdam
Date: Friday 5 February 2010
Time: 2pm
Location: MBA LT

Further details

In this paper, we investigate how firms choose their banks. We focus on the decision factors, the decision process and the decision maker playing a role in determining the firm-bank relationships. We have access to a unique survey run by a major bank in the Czech Republic. We find that firms that consider bank reputation to be an important decision factor, have fewer bank relationships and are less likely to reduce the number or quantity of services taken from their banks. Firms that emphasize the price of bank services are more likely to end relationships and to reduce services. Firms that employ solicited offers when choosing banks have more bank relationships. Interestingly, the identity of the corporate decision maker determines both the number of bank relationships and the firm’s switching behavior. A CFO deciding on his/her own will opt for a lower number of banks and for a higher turnover of the existing bank relationships than a committee of board members.