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Bank misconduct: The deterrent effect of country governance and customer reaction

Author

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  • Carretta, Alessandro
  • Cucinelli, Doriana
  • Fattobene, Lucrezia
  • Schwizer, Paola

Abstract

Using a proprietary, hand-collected database of 251 sanctions issued by national and international authorities on 109 European banks, we investigate the deterrent effect of governance effectiveness at the country level on detected bank misconduct from 2009 to 2019. We also examine the impact of detected bank misconduct on depositor behavior to investigate how customer reaction is shaped by media coverage. Our empirical strategy based on probit and panel fixed effects shows the existence of a deterrent effect exerted by country governance effectiveness. Moreover, the instrumental regressions show that depositors react to detected bank misconduct by withdrawing their funds and that this reaction is stronger when news coverage is high.

Suggested Citation

  • Carretta, Alessandro & Cucinelli, Doriana & Fattobene, Lucrezia & Schwizer, Paola, 2025. "Bank misconduct: The deterrent effect of country governance and customer reaction," Journal of Banking & Finance, Elsevier, vol. 174(C).
    • Handle: RePEc:eee:jbfina:v:174:y:2025:i:c:s0378426625000548
    DOI: 10.1016/j.jbankfin.2025.107434
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    Keywords

    Misconduct; Bank; Institutional context; Media; Depositors; Sanctions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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