SMEs and their bank choices: trust-related factors or economic calculations?
- 29 June 2020
- journal article
- research article
- Published by Emerald in International Journal of Emerging Markets
- Vol. 16 (8), 2092-2116
- https://doi.org/10.1108/ijoem-11-2019-0928
Abstract
The authors investigate the factors affecting the decision of small and medium-sized enterprises (SMEs) to do business with either small local banks or large commercial banks. We combine various data sources on Polish SMEs, including their financial statements, county-level data on SMEs' local environment, information about bank branch locations, as well as a new survey on the specificity of bank–firm relationships. We employ the logit and Tobit models. SMEs' bank choices and the length of a bank–firm relationship are more strongly associated with trust-related factors, rather than transactional ones. SME managers motivated by trust-related factors are more likely to choose local lenders and maintain long-term relationships with them. However, as firms grow and mature, SME managers lean toward banks adopting transaction-oriented policies. We could have drawn a more detailed picture of the bank selection process had we been able to compare the traits of a firm's current and previous banks. The study shows that the features of a bank's offer, including product prices, have limited potential in shaping long-term relationships between banks and SMEs. The topic of bank selection by SMEs has not been thoroughly investigated in the case of Central European countries. We address this gap by comparing two types of potential drivers of bank selection: trust-related factors and a set of purely economic (transactional) motives.Keywords
This publication has 73 references indexed in Scilit:
- Empirical test of the trust–performance link in an international alliances contextInternational Business Review, 2012
- All you need is trust? A critical review of the trust and entrepreneurship literatureInternational Small Business Journal: Researching Entrepreneurship, 2012
- Financing patterns around the world: Are small firms different?Journal of Financial Economics, 2008
- Banks, Distances and Firms' Financing ConstraintsEuropean Finance Review, 2008
- Bank ownership type and banking relationshipsJournal of Financial Intermediation, 2008
- A more complete conceptual framework for SME financeJournal of Banking & Finance, 2006
- “Stress” in business relationships: a study on corporate bank servicesInternational Journal of Bank Marketing, 2005
- Relationship Banking: What Do We Know?Journal of Financial Intermediation, 2000
- Lending relationships in Germany – Empirical evidence from survey dataJournal of Banking & Finance, 1998
- THE BANK SELECTION PROCESS: A COMPARISON OF AUSTRALIA AND THE UNITED STATESEconomic Papers: A Journal of Applied Economics and Policy, 1997