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Title: Trust matters: A global perspective on the influence of trust on bank market risk
Authors: Abdelsalam, O
Chantziaras, A
Joseph, NL
Tsileponis, N
Keywords: equity risk;idiosyncratic volatility;return stability;societal trust
Issue Date: 6-Feb-2024
Publisher: Elsevier
Citation: Abdelsalam, O. et al. (2024) 'Trust matters: A global perspective on the influence of trust on bank market risk', Journal of International Financial Markets, Institutions and Money, 0 (in press, pre-proof), 101959, pp. 1 - 52. doi: 10.1016/j.intfin.2024.101959.
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.
Description: JEL Classifications: G10; G14; G21; G28; Z19.
Data availability: The authors do not have permission to share data.
Supplementary material is available online at: .
ISSN: 1042-4431
Other Identifiers: ORCID iD: Nathan Lael Joseph
Appears in Collections:Dept of Economics and Finance Research Papers

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