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Bank Size and Household Financial Sentiment: Surprising Evidence from the University of Michigan Surveys of Consumers

Author

Listed:
  • Allen N. Berger
  • Felix Irresberger
  • Raluca Roman

Abstract

We analyze comparative advantages/disadvantages of small and large banks in improving household sentiment regarding financial conditions. We match sentiment data from the University Of Michigan Surveys Of Consumers with local banking market data from 2000 to 2014. Surprisingly, the evidence suggests that large rather than small banks have significant comparative advantages in boosting household sentiment. Findings are robust to instrumental variables and other econometric methods. Additional analyses are consistent with both scale economies and the superior safety of large banks as channels behind the main findings. These channels appear to more than offset stronger relationships with and greater trust in small banks.

Suggested Citation

  • Allen N. Berger & Felix Irresberger & Raluca Roman, 2019. "Bank Size and Household Financial Sentiment: Surprising Evidence from the University of Michigan Surveys of Consumers," Working Papers 19-4, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:19-4
    DOI: 10.21799/frbp.wp.2019.04
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2019/wp19-04.pdf
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    Cited by:

    1. Sedunov, John, 2020. "Small banks and consumer satisfaction," Journal of Corporate Finance, Elsevier, vol. 60(C).
    2. Glenn Schepens, 2020. "Discussion of Berger, Irresberger, and Roman," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(S1), pages 193-195, October.

    More about this item

    Keywords

    households; financial sentiment; small banks; large banks; banking market structure;
    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
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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