Work

Bank misconduct: The deterrent effect of country governance and customer reaction

Year: 2025

Type: article

Abstract: Using a proprietary, hand-collected database of 251 sanctions issued by national and international authorities on 109 European banks, we investigate the deterrent effect of governance effectiveness at the country level on detected bank misconduct from 2009 to 2019. We also examine the impact of detected bank misconduct on depositor behavior to investigate how customer reaction is shaped by media coverage. Our empirical strategy based on probit and panel fixed effects shows the existence of a deterrent effect exerted by country governance effectiveness. Moreover, the instrumental regressions show that depositors react to detected bank misconduct by withdrawing their funds and that this reaction is stronger when news coverage is high.

Source: Journal of Banking & Finance

DOI: 10.1016/j.jbankfin.2025.107434

Authors: Alessandro Carretta, Doriana Cucinelli, Lucrezia Fattobene, Paola Schwizer

Institutions: University of Rome Tor Vergata, University of Parma

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,340