Customer Satisfaction and the Durability of Retail Banking Relationships
60 Pages Posted: 14 Dec 2020 Last revised: 27 Mar 2021
Date Written: December 2, 2020
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: Suggested Citation