Bank scandal contagion: Evidence from the Wells Fargo cross-selling scandal

Michael D. Noel and Syed M.I. Osman

Global Finance Journal, 2024, vol. 63, issue C

Abstract: In the event of a negative reputation shock or scandal, do consumers' anger and mistrust in the scandal-affected products spill over to seemingly unrelated lines of business that the scandal did not directly reach? Our paper looks into Wells Fargo's 2016 “cross-selling” scandal to test the negative sentiment contagion effect on its mortgage business. The study finds significant negative contagion effects, but also shows that Wells Fargo was more accommodating in handling complaints, paying compensation more frequently, and successfully lowering disputes towards zero. These actions are interpreted as Wells Fargo's damage control efforts to ‘Contain the Contagion’.

Keywords: Cross-selling; Wells Fargo; Customer sentiment; Natural language processing; Machine learning (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:63:y:2024:i:c:s1044028324001169

DOI: 10.1016/j.gfj.2024.101044

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