Intangible Customer Capital and Bank Resilience

64 Pages Posted: 14 Dec 2020 Last revised: 10 Aug 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: August 9, 2021

Abstract

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

Houston, Joel F. and Shan, Hongyu and Shan, Yu, Intangible Customer Capital and Bank Resilience (August 9, 2021). 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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