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Depositors’ trust: Some empirical evidence from Indonesia

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  • Alamsyah, Halim
  • Ariefianto, Moch. Doddy
  • Saheruddin, Herman
  • Wardono, Seto
  • Trinugroho, Irwan

Abstract

We develop a comprehensive index, based on Robbins and Judge’s (2008) five dimensions of trust, to measure depositors’ trust in individual banks as well as trust in the banking industry and financial safety net. Using a survey of 992 retail depositors in Indonesia, we find that trust in individual banks where depositors save their money is greater than trust in the overall banking industry and financial safety net. We also find that depositors’ trust is affected by personal characteristics—for instance, women and older depositors have relatively less trust. Depositors tend to put their trust in individual banks and the financial system if they have greater trust in information conveyed by the government. Religious and economic values have positive effects on depositors’ trust at both the micro and macro levels. Our results also document that risk-taking behavior is positively associated with depositors’ trust. Furthermore, we find that more-educated depositors have significantly less trust. This finding might imply that the erosion of market discipline by depositors in a country with relatively generous deposit insurance, such as Indonesia, can be mitigated through greater financial literacy.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:riibaf:v:54:y:2020:i:c:s0275531919312103
    DOI: 10.1016/j.ribaf.2020.101251
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    Cited by:

    1. Aldy Fariz Achsanta & Tastaftiyan Risfandy & Putra Pamungkas & Irwan Trinugroho & Herman Saheruddin, 2021. "Related bank deposits: Good or bad for stability?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 735-751, December.
    2. Małgorzata Iwanicz-Drozdowska & Łukasz Kurowski & Bartosz Witkowski, 2023. "Resolution and depositors’ trust empirical analysis of three resolution cases in Poland," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 16(2), pages 239-265, May.

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