What’s the Catch? Suspicion of Bank Motives and Sluggish Refinancing

Eric J Johnson, Stephan Meier and Olivier Toubia

The Review of Financial Studies, 2019, vol. 32, issue 2, 467-495

Abstract: Failing to refinance a mortgage can cost a borrower thousands of dollars. Based on administrative data from a large financial institution, we show that around 50% of borrowers leave thousands of dollars on the table by not refinancing. Survey data indicate that, among all the behavioral factors examined, only suspicion of banks’ motives is consistently related to the probability of accepting a refinancing offer. Finally, we report the results of three field experiments showing that enticing offers made by banks fail to increase participation and may even deepen suspicion. Our findings highlight the important role of trust in financial decisions. Received July 12, 2017; editorial decision April 3, 2018 by Editor Andrew Karolyi. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhy061 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:32:y:2019:i:2:p:467-495.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().