Financial Stability and Public Confidence in Banks

34 Pages Posted: 25 Feb 2019

See all articles by Lucy Chernykh

Lucy Chernykh

Clemson University

Denis Davydov

University of Vaasa - Department of Accounting and Finance

Jukka Sihvonen

Aalto University

Date Written: February 19, 2019

Abstract

We use a novel, household opinions-based measure – Public Confidence in a Bank – to explore the role of bank-level and system-wide determinants of customers’ trust in banks. Our study covers a panel of approximately 260 large Russian commercial banks publicly monitored during 2010–2017. We find that public confidence in a bank is highly sensitive to the industry-level financial stability indicators, but less sensitive to bank-level risk characteristics. This result reveals an important role of overall banking sector stability in determining public perception of the safety and soundness of individual banks.

Keywords: financial stability, public confidence, bank failures, customer opinions, online reviews

JEL Classification: G21, D14

Suggested Citation

Chernykh, Lucy and Davydov, Denis and Sihvonen, Jukka, Financial Stability and Public Confidence in Banks (February 19, 2019). BOFIT Discussion Paper No. 2/2019. Available at SSRN: https://ssrn.com/abstract=3339743

Lucy Chernykh (Contact Author)

Clemson University ( email )

School of Accountancy and Finance
Clemson, SC 29634
United States

Denis Davydov

University of Vaasa - Department of Accounting and Finance ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101
Finland
+358 6 3248 268 (Phone)

Jukka Sihvonen

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

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