The determinants and profitability of switching costs in Chinese banking
نویسنده
چکیده
Using a sample of 151 banks over the period 2003 to 2010, this paper estimates a model that examines the effect of switching costs in the Chinese loan market on banking profitability. In keeping with the extant empirical literature it reports a positive relationship between bank profitability and switching costs. Furthermore it reports the estimation of a systems model of switching costs and profitability. The main result is that bank size measured by total assets is has a complex relationship with switching costs. Competition between small banks creates the incentive for lock-in and increased switching costs whereas very large banks are less exercised by lock-in and switching costs. The study also finds that concentration has a negative relationship with switching costs and profitability, confirming the accepted view that the large state-owned banks are concerned with social as well as profit objectives. Key Terms Chinese banking, switching costs, bank profitability JEL Codes G21, C51, L14 Corresponding Author Wei Yin Cardiff Business School Colum Drive Cardiff CF10 3EU [email protected]
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