Relationships and individualsÕ bank switching behavior Sugato Chakravarty a, * ,RichardFeinberg a ,Eun-YoungRhee b a Purdue University, West Lafayette, IN 47906-1262, USA b Samsung Research Institute of Finance, Seoul 100-102, South Korea Received 20 November 2001; received in revised form 7 March 2003; accepted 19 March 2003 Abstract We examine the role of relationships between individuals and their banks in determining bank switching behavior. Using data from a survey questionnaire from a random sample of bankcustomersintheUnitedStates,wefindthatthevariablesmeasuringthevariousdimen- sionsofarelationshipsignificantlyloweranindividualÕspropensitytoswitchbanks.Thesein- clude the duration of an individualÕs relationship with her bank, whether or not she has had problemswithherbankinthepast,andaspectsofthequalityoftheservicerelationship.An innovationofthecurrentpaperliesinincorporatingfinance/economicaspectsofrelationship with the various dimensions of service quality relationship collectively as determinants of an individualÕspropensitytoswitchbanks.Theattributescapturingwhetherornotanindividual feelsthatherbankisresponsive,isempatheticandisreliabletoherneeds,areallsignificantly negatively correlated with her propensity to switch banks. Our results demonstrate just how relationships may help in limiting bank switching behavior and deliver a strong message to banks about the importance of relationships in retaining loyal customers. Our findings also underscore the interconnectedness of seemingly disparate disciplines to better understand the behavior and decision making of individuals and their banks. Ó 2003 Published by Elsevier Science B.V. PsycINFO classification: 2229; 3920 JEL classification: G14; G21; D82 Keywords: Bank switching; Relationships; Asymmetric information; Moral hazard * Corresponding author. Tel.: +1-765-4946427. E-mail addresses: sugato@purdue.edu (S. Chakravarty), xdj1@purdue.edu (R. Feinberg). 0167-4870/03/$ - see front matter Ó 2003 Published by Elsevier Science B.V. doi:10.1016/S0167-4870(03)00051-5 Journal of Economic Psychology xxx (2003) xxx–xxx www.elsevier.com/locate/joep JOEP 938 No. of Pages 21, DTD = 4.3.1 13 May 2003 Disk used SPS-N, Chennai ARTICLE IN PRESS