Behavioural factor-based clustering to examine why small businesses choose particular bank: The New Zealand evidence

Abstract

In this paper, using the theory of planned behaviour, behavioural and non-behavioural factors underpinning small business’ (SB) choice of a bank are explored. To date, we are unaware of any study that uses a behavioural approach to study bank selection by SBs owner/managers. These factors, discussed in the literature, form the basis of a questionnaire administered in New Zealand. Univariate & bivariate analyses, in addition to cluster analysis of the data, show that behavioral factors, such as knowing a person in the bank, prior personal banking experience and recommendation/referrals, are shown to be most important. Also, after controlling for size, industry, and age of business it is found that there is no statistically significant difference in choice variables. Further, inertia is strong once a bank is chosen and cost, while emphasized, does not trigger actions. A cluster analysis of SB owners/managers produced four different groups. However, all of these groups are affected by the same behavioural factors in their choice of a banking partner.