Reputational Risk and Conflicts of Interest in Banking and Finance: The Evidence so Far

36 Pages Posted: 13 Nov 2008

See all articles by Ingo Walter

Ingo Walter

New York University - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance

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Date Written: December 2006

Abstract

This paper attempts define reputational risk in financial intermediation and to identify the proximate sources of reputationalrisk facing financial services firms. It then considers the key drivers of reputational risk in the presence of transactions costs and imperfect information in financial markets, surveys empirical research in the literature on the impact of reputational losses imposed on financial intermediaries, and presents some new empirical findings. The paper then develops the link betweenreputational risk and exploitation of conflicts of interest in financialintermediation, arguably one of the most important threats to the reputational capital of financial firms. Finally, it considers some managerial requisites for dealing with both reputational risk and conflicts of interest.

Keywords: Operational Risk, Reputation, Conflicts of Interest

Suggested Citation

Walter, Ingo, Reputational Risk and Conflicts of Interest in Banking and Finance: The Evidence so Far (December 2006). NYU Working Paper No. FIN-06-033, Available at SSRN: https://ssrn.com/abstract=1300770

Ingo Walter (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

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New York University (NYU) - Department of Finance

Stern School of Business
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