Intangible Customer Capital and Bank Resilience
60 Pages Posted: 14 Dec 2020 Last revised: 6 Jan 2022
Date Written: August 9, 2021
Bank stability depends critically on the ability to connect and retain customers amid negative shocks. This study proposes a novel measure of accumulated customer capital 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 with higher customer capital mitigate deposit outflows more effectively. 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 intangible customer capital as a novel and important factor influencing the resilience of retail banking relationships.
Keywords: banking relationship, customer capital, deposit, mortgage, textual analysis
JEL Classification: G20, G21, G28, G41
Suggested Citation: Suggested Citation