IDEAS home Printed from https://ideas.repec.org/a/eee/quaeco/v59y2016icp200-214.html
   My bibliography  Save this article

Trusting financial institutions: Out of reach, out of trust?

Author

Listed:
  • Filipiak, Ute

Abstract

This paper empirically investigates the relevance of geographic proximity to a financial institution for trusting this institution with money. In doing so, the paper considers the use of different information sources that may bridge physical distances between individuals and financial institutions, investigating to what extent geographic proximity is still needed to trust a financial institution when information sources are used by Indian households. Based on a large-scale survey of savings patterns of Indians, the empirical results suggest that individuals who cannot commute a financial institutions within a distance of one day are less likely to trust this institution with their money. However, geographic proximity to a financial institution is still relevant for trusting financial institutions when controlling for the use of different information sources.

Suggested Citation

  • Filipiak, Ute, 2016. "Trusting financial institutions: Out of reach, out of trust?," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 200-214.
    • Handle: RePEc:eee:quaeco:v:59:y:2016:i:c:p:200-214
    DOI: 10.1016/j.qref.2015.06.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1062976915000654
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.qref.2015.06.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zoran Ivković & Scott Weisbenner, 2005. "Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments," Journal of Finance, American Finance Association, vol. 60(1), pages 267-306, February.
    2. Werner Boente & Ute Filipiak, 2011. "Financial Investments, Information Flows, and Caste Affiliation - Empirical Evidence from India," Schumpeter Discussion Papers sdp11014, Universitätsbibliothek Wuppertal, University Library.
    3. Hakhverdian, Armen & Mayne, Quinton, 2012. "Institutional Trust, Education, and Corruption: A Micro-Macro Interactive Approach," Scholarly Articles 9639965, Harvard Kennedy School of Government.
    4. Valley, Kathleen L. & Moag, Joseph & Bazerman, Max H., 1998. "'A matter of trust':: Effects of communication on the efficiency and distribution of outcomes," Journal of Economic Behavior & Organization, Elsevier, vol. 34(2), pages 211-238, February.
    5. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, August.
    6. Thorsten Beck & Asli Demirgüç-Kunt, 2008. "Access to Finance: An Unfinished Agenda," The World Bank Economic Review, World Bank, vol. 22(3), pages 383-396, November.
    7. Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2015. "Money Doctors," Journal of Finance, American Finance Association, vol. 70(1), pages 91-114, February.
      • Nicola Gennaioli & Andrei Shleifer & Robert Vishny, "undated". "Money Doctors," Working Paper 69721, Harvard University OpenScholar.
      • Gennaioli, Nicola & Shleifer, Andrei & Vishny, Robert W., 2014. "Money Doctors," Scholarly Articles 12965657, Harvard University Department of Economics.
      • Nicola Gennaioli & Andrei Shleifer & Robert W. Vishny, 2012. "Money Doctors," NBER Working Papers 18174, National Bureau of Economic Research, Inc.
      • Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2012. "Money Doctors," Working Papers 464, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
      • Nicola Gennaioli & Andrei Shleifer & Robert Vishny, "undated". "Money Doctors," Working Paper 228501, Harvard University OpenScholar.
      • Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2012. "Money doctors," Economics Working Papers 1355, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Dimitris Georgarakos & Giacomo Pasini, 2011. "Trust, Sociability, and Stock Market Participation," Review of Finance, European Finance Association, vol. 15(4), pages 693-725.
    9. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    10. Katrin Hussinger, 2008. "R&D and subsidies at the firm level: an application of parametric and semiparametric two-step selection models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 729-747.
    11. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    12. Fisman, Raymond & Khanna, Tarun, 1999. "Is trust a historical residue? Information flows and trust levels," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 79-92, January.
    13. Akbar Zaheer & Bill McEvily & Vincenzo Perrone, 1998. "Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance," Organization Science, INFORMS, vol. 9(2), pages 141-159, April.
    14. Tim Liao, 1995. "The nonrandom selection of don't knows in binary and ordinal responses: Corrections with the bivariate probit model with sample selection," Quality & Quantity: International Journal of Methodology, Springer, vol. 29(1), pages 87-110, February.
    15. Honohan, Patrick, 2008. "Cross-country variation in household access to financial services," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2493-2500, November.
    16. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Trusting the Stock Market," Journal of Finance, American Finance Association, vol. 63(6), pages 2557-2600, December.
    17. Katherine J. Stewart, 2003. "Trust Transfer on the World Wide Web," Organization Science, INFORMS, vol. 14(1), pages 5-17, February.
    18. Kaivan Munshi & Mark R. Rosenzweig, 2005. "Why is Mobility in India so Low? Social Insurance, Inequality, and Growth," CID Working Papers 121, Center for International Development at Harvard University.
    19. Bönte, Werner & Filipiak, Ute, 2012. "Financial literacy, information flows, and caste affiliation: Empirical evidence from India," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3399-3414.
    20. Metcalfe, Stan & Ramlogan, Ronnie, 2008. "Innovation systems and the competitive process in developing economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 433-446, May.
    21. van der Boor, Paul & Oliveira, Pedro & Veloso, Francisco, 2014. "Users as innovators in developing countries: The global sources of innovation and diffusion in mobile banking services," Research Policy, Elsevier, vol. 43(9), pages 1594-1607.
    22. Priya Basu, 2006. "Improving Access to Finance for India's Rural Poor," World Bank Publications - Books, The World Bank Group, number 6927, December.
    23. Huberman, Gur, 2001. "Familiarity Breeds Investment," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 659-680.
    24. Stix, Helmut, 2013. "Why do people save in cash? Distrust, memories of banking crises, weak institutions and dollarization," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4087-4106.
    25. Bönte, Werner, 2008. "Inter-firm trust in buyer-supplier relations: Are knowledge spillovers and geographical proximity relevant?," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 855-870, September.
    26. Demirguc-Kunt, Asli & Klapper, Leora, 2012. "Measuring financial inclusion : the Global Findex Database," Policy Research Working Paper Series 6025, The World Bank.
    27. Marianne Bertrand & Sendhil Mullainathan & Eldar Shafir, 2004. "A Behavioral-Economics View of Poverty," American Economic Review, American Economic Association, vol. 94(2), pages 419-423, May.
    28. Joshua D. Coval & Tobias J. Moskowitz, 2001. "The Geography of Investment: Informed Trading and Asset Prices," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 811-841, August.
    29. Rasoul Rezvanian & Narendar Rao & Seyed Mehdian, 2008. "Efficiency change, technological progress and productivity growth of private, public and foreign banks in India: evidence from the post-liberalization era," Applied Financial Economics, Taylor & Francis Journals, vol. 18(9), pages 701-713.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carin van der Cruijsen & Jakob de Haan & Ria Roerink, 2021. "Financial knowledge and trust in financial institutions," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(2), pages 680-714, June.
    2. Marie-Claire Broekhoff & Carin van der Cruijsen & Jakob de Haan, 2023. "Towards financial inclusion: trust in banks’ payment services among groups at risk," Working Papers 795, DNB.
    3. Alamsyah, Halim & Ariefianto, Moch. Doddy & Saheruddin, Herman & Wardono, Seto & Trinugroho, Irwan, 2020. "Depositors’ trust: Some empirical evidence from Indonesia," Research in International Business and Finance, Elsevier, vol. 54(C).
    4. Carin van der Cruijsen & Jakob de Haan & Ria Roerink, 2023. "Trust in financial institutions: A survey," Journal of Economic Surveys, Wiley Blackwell, vol. 37(4), pages 1214-1254, September.
    5. Ghosh, Saibal, 2021. "How important is trust in driving financial inclusion?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    6. Rink, Ute & Walle, Yabibal M. & Klasen, Stephan, 2021. "The financial literacy gender gap and the role of culture," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 117-134.
    7. Beckmann, Elisabeth & Mare, Davide Salvatore, 2017. "Formal and informal household savings: how does trust in financial institutions influence the choice of saving instruments?," MPRA Paper 81141, University Library of Munich, Germany.
    8. Grace Ibe-enwo & Nicholas Igbudu & Zanete Garanti & Temitope Popoola, 2019. "Assessing the Relevance of Green Banking Practice on Bank Loyalty: The Mediating Effect of Green Image and Bank Trust," Sustainability, MDPI, vol. 11(17), pages 1-16, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ute Filipiak, 2013. "Trusting Financial Institutions: Out of Reach, out of Trust?," Schumpeter Discussion Papers sdp13002, Universitätsbibliothek Wuppertal, University Library.
    2. Guiso, Luigi & Sodini, Paolo, 2013. "Household Finance: An Emerging Field," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1397-1532, Elsevier.
    3. Mylonidis, Nikolaos & Chletsos, Michael & Barbagianni, Vanessa, 2019. "Financial exclusion in the USA: Looking beyond demographics," Journal of Financial Stability, Elsevier, vol. 40(C), pages 144-158.
    4. Bo Becker & Zoran Ivković & Scott Weisbenner, 2011. "Local Dividend Clienteles," Journal of Finance, American Finance Association, vol. 66(2), pages 655-683, April.
    5. Eleonora Patacchini & Edoardo Rainone, 2017. "Social Ties and the Demand for Financial Services," Journal of Financial Services Research, Springer;Western Finance Association, vol. 52(1), pages 35-88, October.
    6. Shao, Ran & Wang, Na, 2021. "Trust and local bias of individual investors," Journal of Banking & Finance, Elsevier, vol. 133(C).
    7. Jim Engle-Warnick & Diego Pulido & Marine de Montaignac, 2016. "Trust, ambiguity, and financial decision-making," CIRANO Working Papers 2016s-44, CIRANO.
    8. Alho, Eeva, 2015. "The effect of social bonding and identity on the decision to invest in food production," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 59(C), pages 47-55.
    9. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, August.
    10. Emre Kuvvet, 2019. "The impact of international bribery on U.S. household stock investments," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 409-419, April.
    11. Philip Maximilian Linhart & Olaf Stotz, 2022. "Which factors support trust in the recommendation process of pension products? Trust and pension products," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(4), pages 322-334, December.
    12. Michael Berlemann & Marc-André Luik, 2014. "Institutional Reform and Depositors' Portfolio Choice - Evidence from Censored Quantile Regressions," CESifo Working Paper Series 4782, CESifo.
    13. Bose, Udichibarna & Arun, Thankom & Arun, Shoba, 2021. "Do information networks benefit households with female heads?," Economic Modelling, Elsevier, vol. 103(C).
    14. David C. Ling & Andy Naranjo & Benjamin Scheick, 2021. "There is no place like home: Information asymmetries, local asset concentration, and portfolio returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(1), pages 36-74, March.
    15. Dai, Na & Jo, Hoje & Kassicieh, Sul, 2012. "Cross-border venture capital investments in Asia: Selection and exit performance," Journal of Business Venturing, Elsevier, vol. 27(6), pages 666-684.
    16. Jagannathan, Murali & Jiao, Wei & Karolyi, G. Andrew, 2022. "Is there a home field advantage in global markets?," Journal of Financial Economics, Elsevier, vol. 143(2), pages 742-770.
    17. Benson, Bradley W. & Chen, Yu & James, Hui L. & Park, Jung Chul, 2020. "So far away from me: Firm location and the managerial ownership effect on firm value," Journal of Corporate Finance, Elsevier, vol. 64(C).
    18. Massa, Massimo & Zhang, Jian & ,, 2015. "Investing in Low-Trust Countries: Trust in the Global Mutual Fund Industry," CEPR Discussion Papers 10472, C.E.P.R. Discussion Papers.
    19. Jiang, Jiajun & Liu, Yu-Jane & Lu, Ruichang, 2020. "Social heterogeneity and local bias in peer-to-peer lending – evidence from China," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 302-324.
    20. Uysal, Vahap B. & Kedia, Simi & Panchapagesan, Venkatesh, 2008. "Geography and acquirer returns," Journal of Financial Intermediation, Elsevier, vol. 17(2), pages 256-275, April.

    More about this item

    Keywords

    Trust; Financial institutions; Geographic proximity; India;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:59:y:2016:i:c:p:200-214. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620167 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.