Does distrust in banks reduce bank risk-taking?

Axelle Heyert and Laurent Weill

Finance Research Letters, 2024, vol. 68, issue C

Abstract: This paper investigates whether distrust in banks affects bank risk-taking. We test the hypothesis that increased distrust in banks prompts more vigilant monitoring by individuals, thus discouraging banks from engaging in risky behavior. Our analysis utilizes bank-level data from 85 countries spanning the years 2012-2022. We construct an indicator to measure distrust in banks using Google Trends for each country and year. We find no significant effect of distrust in banks on bank risk-taking. These results still hold after performing robustness checks. This conclusion does not challenge the commonly held view that authorities should promote trust in banks.

Keywords: Trust; Banking; Risk-taking (search for similar items in EconPapers)
JEL-codes: D14 G21 G40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324010043

DOI: 10.1016/j.frl.2024.105974

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