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“Time for a Change of Scenery”: Loan Conditions When Firms Switch Bank Branches

Author

Listed:
  • Di Gong

    (University of International Business and Economics (UIBE) - School of Banking and Finance)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

  • Shusen Qi

    (Xiamen University)

Abstract

Firms switching banks initially receive a lower loan rate. But what if firms switch branches within the same bank? Studying the population of corporate loans originated by a large commercial bank in China from 2010 to 2020, we find that when firms switch branches, the switching loans carry a significantly lower spread than the comparable nonswitching loans as well. After switching, the new branch further reduces the loan spreads initially, but ratchets it up afterwards, surprising evidence of the existence of intra-bank holdup ! Importantly, the deployment of FinTech within the bank first mitigates but then intensifies this holdup.

Suggested Citation

  • Di Gong & Steven Ongena & Shusen Qi, 2025. "“Time for a Change of Scenery”: Loan Conditions When Firms Switch Bank Branches," Swiss Finance Institute Research Paper Series 25-10, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2510
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    More about this item

    Keywords

    bank lending; hold-up; firm-bank relationship;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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