Trust Matters: A Global Perspective on the Influence of Trust on Bank Market Risk

Omneya Abdelsalam; Antonios Chantziaras; Nathan Joseph; Nikolaos Tsileponis

doi:10.1016/j.intfin.2024.101959

Trust Matters: A Global Perspective on the Influence of Trust on Bank Market Risk

Omneya Abdelsalam^*, Antonios Chantziaras^*, Nathan Joseph^*, Nikolaos Tsileponis^*

^*Corresponding author for this work

School of Accounting and Finance - Business School

Research output: Contribution to journal › Article (Academic Journal) › peer-review

4 Citations (Scopus)

Abstract

This paper examines the role of societal and organizational trust in mitigating market risk within the banking sector. Using a global sample of 10,616 bank-year observations across 45 countries, we find that higher trust significantly reduces bank total and idiosyncratic risk. The risk-mitigating effect of societal trust becomes more pronounced for banks headquartered in countries with weaker investor protection, diminished legal rights, dissatisfaction with government economic policies, and higher political unrest. Our results suggest that trust serves as an alternative governance mechanism, substituting for ineffective formal institutions in reducing bank risk. These findings have important implications for financial regulation worldwide.

Original language	English
Article number	101959
Number of pages	22
Journal	Journal of International Financial Markets, Institutions and Money
Volume	92
Early online date	6 Feb 2024
DOIs	https://doi.org/10.1016/j.intfin.2024.101959
Publication status	Published - 1 Apr 2024

Bibliographical note

Publisher Copyright:
© 2024 The Author(s)

Access to Document

10.1016/j.intfin.2024.101959Licence: CC BY

Handle.net

Persistent link

Cite this

@article{14aa66e25cac469ea2fb06a724479359,

title = "Trust Matters: A Global Perspective on the Influence of Trust on Bank Market Risk",

abstract = "This paper examines the role of societal and organizational trust in mitigating market risk within the banking sector. Using a global sample of 10,616 bank-year observations across 45 countries, we find that higher trust significantly reduces bank total and idiosyncratic risk. The risk-mitigating effect of societal trust becomes more pronounced for banks headquartered in countries with weaker investor protection, diminished legal rights, dissatisfaction with government economic policies, and higher political unrest. Our results suggest that trust serves as an alternative governance mechanism, substituting for ineffective formal institutions in reducing bank risk. These findings have important implications for financial regulation worldwide.",

author = "Omneya Abdelsalam and Antonios Chantziaras and Nathan Joseph and Nikolaos Tsileponis",

note = "Publisher Copyright: {\textcopyright} 2024 The Author(s)",

year = "2024",

month = apr,

day = "1",

doi = "10.1016/j.intfin.2024.101959",

language = "English",

volume = "92",

journal = "Journal of International Financial Markets, Institutions and Money",

issn = "1042-4431",

publisher = "Amsterdam:Elsevier",

}

TY - JOUR

T1 - Trust Matters

T2 - A Global Perspective on the Influence of Trust on Bank Market Risk

AU - Abdelsalam, Omneya

AU - Chantziaras, Antonios

AU - Joseph, Nathan

AU - Tsileponis, Nikolaos

PY - 2024/4/1

Y1 - 2024/4/1

N2 - This paper examines the role of societal and organizational trust in mitigating market risk within the banking sector. Using a global sample of 10,616 bank-year observations across 45 countries, we find that higher trust significantly reduces bank total and idiosyncratic risk. The risk-mitigating effect of societal trust becomes more pronounced for banks headquartered in countries with weaker investor protection, diminished legal rights, dissatisfaction with government economic policies, and higher political unrest. Our results suggest that trust serves as an alternative governance mechanism, substituting for ineffective formal institutions in reducing bank risk. These findings have important implications for financial regulation worldwide.

AB - This paper examines the role of societal and organizational trust in mitigating market risk within the banking sector. Using a global sample of 10,616 bank-year observations across 45 countries, we find that higher trust significantly reduces bank total and idiosyncratic risk. The risk-mitigating effect of societal trust becomes more pronounced for banks headquartered in countries with weaker investor protection, diminished legal rights, dissatisfaction with government economic policies, and higher political unrest. Our results suggest that trust serves as an alternative governance mechanism, substituting for ineffective formal institutions in reducing bank risk. These findings have important implications for financial regulation worldwide.

U2 - 10.1016/j.intfin.2024.101959

DO - 10.1016/j.intfin.2024.101959

M3 - Article (Academic Journal)

SN - 1042-4431

VL - 92

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

M1 - 101959

ER -

Trust Matters: A Global Perspective on the Influence of Trust on Bank Market Risk

Abstract

Bibliographical note

Access to Document

Handle.net

Fingerprint

Cite this