Customer Satisfaction and the Durability of Retail Banking Relationships

60 Pages Posted: 14 Dec 2020 Last revised: 27 Mar 2021

See all articles by Joel F. Houston

Joel F. Houston

University of Florida - Department of Finance, Insurance and Real Estate

Hongyu Shan

Fordham University - Finance Area

Yu Shan

Concordia University - John Molson School of Business

Date Written: December 2, 2020

Abstract

Building on 699,008 reviews of 75,903 U.S. bank branches, this paper proposes the first detailed empirical framework to study how banks engage with customers at the branch level. In a within bank-county estimation, we exploit reputation damage as exogenous negative shocks to deposit-taking and find that branches receiving higher ratings mitigate deposit outflows more effectively following these shocks. These results are stronger in neighborhoods with higher income and lower population mobility, and for branches of community banks. Overall, our work highlights the value of customer interactions as a novel and important non-price factor influencing the durability of retail banking relationships.

Keywords: retail banking, customer satisfaction, deposit, mortgage, textual analysis

JEL Classification: G20, G21, G28, G41

Suggested Citation

Houston, Joel F. and Shan, Hongyu and Shan, Yu, Customer Satisfaction and the Durability of Retail Banking Relationships (December 2, 2020). Available at SSRN: https://ssrn.com/abstract=3697693 or http://dx.doi.org/10.2139/ssrn.3697693

Joel F. Houston

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Hongyu Shan (Contact Author)

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

Yu Shan

Concordia University - John Molson School of Business ( email )

1450 Guy Street, MB 12.217
Montreal, Quebec H3H 0A1
Canada
(514) 848-2424 (Phone)

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