Characteristics of Small and Medium-size Enterprises that Have Changed Their Main Bank

The purpose of this paper is to reexamine relationship banking. The author empirically analyzes changes in the "main bank" of small and medium-size enterprises (SMEs) to illustrate the characteristics of such SMEs by focusing on cases in which an SME has terminated its relationship with the bank most closely associated with it. Specifically, this study extracted samples of SMEs from all 47 prefectures, tracked the same SMEs, and examined whether or not they changed their main bank in the two 10-year periods of 1980-1990 and 1990-2000. Consequently, it has been found that companies are more inclined to change their main bank when they have greater potential for growth, are in business for fewer years, smaller in size, associated with a greater number of banks, and operating in areas where banks are in fierce competition, as well as when their main bank has poor performance.



In the recent years, there has been a growing emphasis on the need to reinforce the function of banking services closely associated with local needs. The findings of this study, however, indicate that a business model based on a long-term relationship with the main bank is not necessarily the best answer and that a new business model needs to be created to enhance the qualitative function of local banking services.