Bank Crises and Investor Confidence

Una Okonkwo Osili and Anna Paulson

No 2009-WP-01, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

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 effects on 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: Systemic Bank Crisis; Financial Crisis; Investor Confidence (search for similar items in EconPapers)
JEL-codes: D03 G01 G21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2009-02
References: Add references at CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Bank Crises and Investor Confidence (2009)
Working Paper: Bank crises and investor confidence (2008)
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