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Does distrust in banks reduce bank risk-taking?

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  • Heyert, Axelle
  • Weill, Laurent

Abstract

This paper investigates whether distrust in banks affects bank risk-taking. We test the hypothesis that increased distrust in banks prompts more vigilant monitoring by individuals, thus discouraging banks from engaging in risky behavior. Our analysis utilizes bank-level data from 85 countries spanning the years 2012-2022. We construct an indicator to measure distrust in banks using Google Trends for each country and year. We find no significant effect of distrust in banks on bank risk-taking. These results still hold after performing robustness checks. This conclusion does not challenge the commonly held view that authorities should promote trust in banks.

Suggested Citation

  • Heyert, Axelle & Weill, Laurent, 2024. "Does distrust in banks reduce bank risk-taking?," Finance Research Letters, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324010043
    DOI: 10.1016/j.frl.2024.105974
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    References listed on IDEAS

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    More about this item

    Keywords

    Trust; Banking; Risk-taking;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G40 - Financial Economics - - Behavioral Finance - - - General

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