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Bank crises and investor confidence

Una Osili and Anna Paulson ()

No WP-08-17, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: In addition to their direct effects, episodes of financial instability may decrease investor confidence. Measuring the impact of a crisis on investor confidence is complicated by the fact that it is difficult to disentangle the effect of investor confidence from coincident direct effects of the crisis. In order to isolate the effects of financial crises on investor confidence, we study the investment behavior of immigrants in the U.S. Our findings indicate that systemic banking crises have important effects on investor behavior. Immigrants who have experienced a banking crisis in their countries of origin are significantly less likely to have bank accounts in the U.S. This finding is robust to including important individual controls like wealth, education, income, and age. In addition, the effect of crises is robust to controlling for a variety of country of origin characteristics, including measures of financial and economic development and specifications with country of origin fixed effects.

Keywords: Financial; crises (search for similar items in EconPapers)
Date: 2008
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Working Paper: Bank Crises and Investor Confidence (2009) Downloads
Working Paper: Bank Crises and Investor Confidence (2009) Downloads
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