The Effects of Bank Ownership Type on Banking Relationships and Multiple Banking in Developing Economies Detailed Evidence from India

There is extensive research on banking relationships, multiple banking, and bank ownership types – foreign-owned, state-owned, and private, domestically-owned banks. However, no prior studies to our knowledge have directly tested the abilities of these ownership types to provide the main banking relationship or second banking relationship with firms, or investigated the effects of these ownership types in determining whether firms have multiple banking relationships. There are also very few studies of banking relationships and multiple banking issues in developing nations. We address these issues using data on Indian firms, banks, and their relationships. India is an important developing economy and our findings may be representative of other developing economies, where banking relationships tend to play key roles in mitigating financial market imperfections. Our hypothesis tests yield a number of interesting findings that suggest that the different bank ownership types have important effects on bank-firm relationships with several research and policy implications