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Examining the Relationship between Bank Reputational Disaster and Sponsored Money Market Fund Flows

Author

Listed:
  • Erdinc Akyildirim

    (University of Zurich)

  • Shaen Corbet

    (Dublin City University ; University of Waikato - Management School)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

  • David Staunton

    (Dublin City University)

Abstract

This study examines the repercussions of banks’ reputational damages on affiliated Money Market Funds (MMFs). It reveals that such events depress bank valuations and induce heightened outflows from MMFs despite their financial independence from sponsoring banks. Highlighting a secondary behavioural effect, we demonstrate that investor sensitivity to reputational risks amplifies the contagion risk between banks and MMFs. The effect is particularly pronounced for shocks related to governance. Our findings underscore the significant impact of reputational events on the stability and liquidity of financial institutions and their investment vehicles, enriching the discourse on investor behaviour and systemic financial interdependencies.

Suggested Citation

  • Erdinc Akyildirim & Shaen Corbet & Steven Ongena & David Staunton, 2024. "Examining the Relationship between Bank Reputational Disaster and Sponsored Money Market Fund Flows," Swiss Finance Institute Research Paper Series 24-24, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2424
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