The Effects of Bank Switching: Firm Level Evidence from Finnish Small and Micro Firms

23 Pages Posted: 17 Jan 2006

See all articles by Jyrki Niskanen

Jyrki Niskanen

University of Kuopio - Department of Business and Management

Mervi Niskanen

University of Eastern Finland

Date Written: December 30, 2005

Abstract

This paper investigates the impact that bank switching has on loan availability and credit terms of small and micro firms. We are able to separate between different reasons behind the bank switch. Our data includes firms which have undergone bank change after the failure of their main bank, after the merger of their main bank and voluntary, firm initiated bank switches. The results are ambiguous. On one hand we find that bank switching makes it more difficult for firms to obtain a loan. On the other hand we find that interest rate margins on loans are lower for the firms that have switched their main bank. Small firms are more likely to be financially constrained after any type of bank switch whereas this likelihood increases for the larger firms in the sample only after a voluntary bank switch. Interest rate margins are lower for the larger firms after a bank merger but increase for the smaller firms after a merger.

Keywords: Bank switch, loan availability, credit terms and small business

JEL Classification: G14, G21

Suggested Citation

Niskanen, Jyrki and Niskanen, Mervi, The Effects of Bank Switching: Firm Level Evidence from Finnish Small and Micro Firms (December 30, 2005). Available at SSRN: https://ssrn.com/abstract=874946 or http://dx.doi.org/10.2139/ssrn.874946

Jyrki Niskanen

University of Kuopio - Department of Business and Management ( email )

Kuopio, 70211
Finland

Mervi Niskanen (Contact Author)

University of Eastern Finland ( email )

PL 1627
Kuopio, 70211
Finland

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