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The determinants and profitability of switching costs in Chinese banking

Author

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  • Wei Yin
  • Kent Matthews
Abstract
This article models the determinants of bank switching costs in China in terms of bank characteristics and non-bank variables. It also determines the contribution of switching costs to banks’ profits. Using a sample of 151 banks over the period 2003–2013 it reports a positive relationship between bank profitability and switching costs. The main result is that bank size measured by total assets 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.

Suggested Citation

  • Wei Yin & Kent Matthews, 2016. "The determinants and profitability of switching costs in Chinese banking," Applied Economics, Taylor & Francis Journals, vol. 48(43), pages 4156-4166, September.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:43:p:4156-4166
    DOI: 10.1080/00036846.2016.1153790
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    Cited by:

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    4. Rizkiah, Siti K. & Disli, Mustafa & Salim, Kinan & Razak, Lutfi A., 2021. "Switching costs and bank competition: Evidence from dual banking economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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