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The role of depositors’ expectations in bank risk: a dual-channel perspective

Author

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  • Hu, Guangyu
  • Shen, Yu

Abstract

This paper focuses on analyzing the impact of depositors' expectations on banks' risk and its channels of action. Analyzing data from 298 Chinese banks and survey data from the People's Bank of China, we find that favorable depositors’ expectations correlate with reduced bank risk. Analysis of the quantity and price channels shows that favorable depositors’ expectations increase the volume and reduce the cost of the banks' funding sources, consequently lowering bank risk. These insights underscore the importance of incorporating depositors’ expectations into bank risk management strategies and macro-prudential regulation.

Suggested Citation

  • Hu, Guangyu & Shen, Yu, 2025. "The role of depositors’ expectations in bank risk: a dual-channel perspective," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325010281
    DOI: 10.1016/j.frl.2025.107770
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    References listed on IDEAS

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    1. Wu, Chen & Dong, Zhiyong, 2025. "Robo-advisory services and bank risk: Evidence from Chinese commercial banks," Finance Research Letters, Elsevier, vol. 86(PA).

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    More about this item

    Keywords

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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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