Financial Stability and Public Confidence in Banks

Lucy Chernykh; Denis Davydov; Jukka Sihvonen

doi:10.1016/j.jfs.2023.101187

Financial Stability and Public Confidence in Banks

Lucy Chernykh^*
, Denis Davydov
, Jukka Sihvonen

^*Tämän työn vastaava kirjoittaja

Clemson University
Hanken School of Economics

Tutkimustuotos: Lehtiartikkeli › Article › Scientific › vertaisarvioitu

8 Sitaatiot (Scopus)

6 Lataukset (Pure)

Abstrakti

We use a novel, household opinion-based measure – Public Confidence in a Bank – to explore the role of bank-level and industry-level determinants of retail customers’ trust in commercial banks. Our study tracks bank-month confidence measures during the 1/1/2010–1/1/2019 period in an unbalanced sample of 181 closely monitored large Russian banks that collectively account for the supermajority of the country's banking assets. We find that contrary to common expectations, public confidence in a bank is heavily driven by the industry-level financial stability indicators, while bank-level risk measures play only a minimal – or, at best, supplementary – role. This result reveals the important role of overall banking sector stability in determining public perception of the safety and soundness of individual banks and justifies the leading role of industry-level stability in ensuring trust in banks.

Alkuperäiskieli	Englanti
Artikkeli	101187
Sivumäärä	15
Julkaisu	Journal of Financial Stability
Vuosikerta	69
Varhainen verkossa julkaisun päivämäärä	7 lokak. 2023
DOI - pysyväislinkit	https://doi.org/10.1016/j.jfs.2023.101187
Tila	Julkaistu - jouluk. 2023
OKM-julkaisutyyppi	A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä

Rahoitus

We would like to thank Zuzana Fungáčová, Alexei Karas, Michael Pagano, Laurent Weill, participants at the 2019 EFA annual meeting, the 2018 Annual CInSt Banking Workshop, and the 2018 Vaasa Banking Research Workshop, seminar participants at the Bank of Finland Institute for Emerging Economies (BOFIT) and Stockholm University for their feedback and suggestions on previous versions of this paper. We would also like to thank anonymous reviewers for their valuable comments and suggestions.

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SDG 10 – Vähentynyt eriarvoisuus

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10.1016/j.jfs.2023.101187

Chernykh-Davydov-Sihvonen_Financial-stability-and-public-confidence-in-banksAccepted author manuscript, 688 KBLisenssi: CC BY-NC-ND

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title = "Financial Stability and Public Confidence in Banks",

abstract = "We use a novel, household opinion-based measure {\textendash} Public Confidence in a Bank {\textendash} to explore the role of bank-level and industry-level determinants of retail customers{\textquoteright} trust in commercial banks. Our study tracks bank-month confidence measures during the 1/1/2010{\textendash}1/1/2019 period in an unbalanced sample of 181 closely monitored large Russian banks that collectively account for the supermajority of the country's banking assets. We find that contrary to common expectations, public confidence in a bank is heavily driven by the industry-level financial stability indicators, while bank-level risk measures play only a minimal {\textendash} or, at best, supplementary {\textendash} role. This result reveals the important role of overall banking sector stability in determining public perception of the safety and soundness of individual banks and justifies the leading role of industry-level stability in ensuring trust in banks.",

keywords = "Bank risk, bank failures, Customer opinions, Financial stability, Online reviews, Public confidence",

author = "Lucy Chernykh and Denis Davydov and Jukka Sihvonen",

note = "Funding Information: We would like to thank Zuzana Fung{\'a}{\v c}ov{\'a}, Alexei Karas, Michael Pagano, Laurent Weill, participants at the 2019 EFA annual meeting, the 2018 Annual CInSt Banking Workshop, and the 2018 Vaasa Banking Research Workshop, seminar participants at the Bank of Finland Institute for Emerging Economies (BOFIT) and Stockholm University for their feedback and suggestions on previous versions of this paper. We would also like to thank anonymous reviewers for their valuable comments and suggestions. Publisher Copyright: {\textcopyright} 2023 Elsevier B.V.",

year = "2023",

month = dec,

doi = "10.1016/j.jfs.2023.101187",

language = "English",

volume = "69",

journal = "Journal of Financial Stability",

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TY - JOUR

T1 - Financial Stability and Public Confidence in Banks

AU - Chernykh, Lucy

AU - Davydov, Denis

AU - Sihvonen, Jukka

N1 - Funding Information: We would like to thank Zuzana Fungáčová, Alexei Karas, Michael Pagano, Laurent Weill, participants at the 2019 EFA annual meeting, the 2018 Annual CInSt Banking Workshop, and the 2018 Vaasa Banking Research Workshop, seminar participants at the Bank of Finland Institute for Emerging Economies (BOFIT) and Stockholm University for their feedback and suggestions on previous versions of this paper. We would also like to thank anonymous reviewers for their valuable comments and suggestions. Publisher Copyright: © 2023 Elsevier B.V.

PY - 2023/12

Y1 - 2023/12

N2 - We use a novel, household opinion-based measure – Public Confidence in a Bank – to explore the role of bank-level and industry-level determinants of retail customers’ trust in commercial banks. Our study tracks bank-month confidence measures during the 1/1/2010–1/1/2019 period in an unbalanced sample of 181 closely monitored large Russian banks that collectively account for the supermajority of the country's banking assets. We find that contrary to common expectations, public confidence in a bank is heavily driven by the industry-level financial stability indicators, while bank-level risk measures play only a minimal – or, at best, supplementary – role. This result reveals the important role of overall banking sector stability in determining public perception of the safety and soundness of individual banks and justifies the leading role of industry-level stability in ensuring trust in banks.

AB - We use a novel, household opinion-based measure – Public Confidence in a Bank – to explore the role of bank-level and industry-level determinants of retail customers’ trust in commercial banks. Our study tracks bank-month confidence measures during the 1/1/2010–1/1/2019 period in an unbalanced sample of 181 closely monitored large Russian banks that collectively account for the supermajority of the country's banking assets. We find that contrary to common expectations, public confidence in a bank is heavily driven by the industry-level financial stability indicators, while bank-level risk measures play only a minimal – or, at best, supplementary – role. This result reveals the important role of overall banking sector stability in determining public perception of the safety and soundness of individual banks and justifies the leading role of industry-level stability in ensuring trust in banks.

KW - Bank risk, bank failures

KW - Customer opinions

KW - Financial stability

KW - Online reviews

KW - Public confidence

UR - https://www.scopus.com/pages/publications/85174340073

U2 - 10.1016/j.jfs.2023.101187

DO - 10.1016/j.jfs.2023.101187

M3 - Article

AN - SCOPUS:85174340073

SN - 1572-3089

VL - 69

JO - Journal of Financial Stability

JF - Journal of Financial Stability

M1 - 101187

ER -

Financial Stability and Public Confidence in Banks

Abstrakti

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