IDEAS home Printed from https://ideas.repec.org/a/ibn/ijefaa/v9y2017i6p38-51.html
   My bibliography  Save this article

Get in with a Foreigner: Consumer Trust in Domestic and Foreign Banks

Author

Listed:
  • Werner Bonte
  • Ute Filipiak
  • Sandro Lombardo

Abstract

Prior research suggests that trust plays an important role in an individual¡¯s decision to participate in financial markets. This paper focuses on potential customers in retail banking markets and empirically investigates their trust in foreign banks and domestic banks. We argue that differences in customer trust can be related to three factors, namely bank-specific characteristics, individual characteristics of the potential customer and characteristics of the institutional environment. Using a large survey on the savings patterns of Indian households, we find that potential retail banking customers in India are less likely to trust foreign banks with their money than private Indian banks. However, our results also suggest that highly educated Indians using information sources such as the Internet, radio or newspaper, tend to have more confidence in foreign banks than in private Indian banks. Moreover, in regions with either more foreign bank branches or higher corruption levels the likelihood of consumers trusting Indian private banks more than foreign banks is lower than in other regions.

Suggested Citation

  • Werner Bonte & Ute Filipiak & Sandro Lombardo, 2017. "Get in with a Foreigner: Consumer Trust in Domestic and Foreign Banks," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(6), pages 38-51, June.
  • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:6:p:38-51
    as

    Download full text from publisher

    File URL: http://ccsenet.org/journal/index.php/ijef/article/view/68133/36956
    Download Restriction: no

    File URL: http://ccsenet.org/journal/index.php/ijef/article/view/68133
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    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. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Trusting the Stock Market," Journal of Finance, American Finance Association, vol. 63(6), pages 2557-2600, December.
    4. Hakhverdian, Armen & Mayne, Quinton, 2012. "Institutional Trust, Education, and Corruption: A Micro-Macro Interactive Approach," Scholarly Articles 9639965, Harvard Kennedy School of Government.
    5. George Clarke & Robert Cull & Maria Soledad Martinez Peria & Susana M. S·nchez, 2003. "Foreign Bank Entry: Experience, Implications for Developing Economies, and Agenda for Further Research," World Bank Research Observer, World Bank Group, vol. 18(1), pages 25-59.
    6. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, August.
    7. Huberman, Gur, 2001. "Familiarity Breeds Investment," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 659-680.
    8. Ali Ataullah & Hang Le, 2004. "Financial repression and liability of foreignness in developing countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(9), pages 545-549.
    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. 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.
    11. repec:hrv:faseco:30726298 is not listed on IDEAS
    12. 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.
    13. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1095-1131.
    14. Denk, Nikola & Kaufmann, Lutz & Roesch, Jan-Frederik, 2012. "Liabilities of Foreignness Revisited: A Review of Contemporary Studies and Recommendations for Future Research," Journal of International Management, Elsevier, vol. 18(4), pages 322-334.
    15. 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.
    16. V K Shobhana & G Shanthi, 2008. "Operational Efficiency of Foreign Banks Operating in India: A Non-Parametric Model," The IUP Journal of Bank Management, IUP Publications, vol. 0(1), pages 41-49, February.
    17. Bauer, Christian & Herz, Bernhard & Hoops, Stefan, 2008. "A Cheap Lunch for Emerging Markets: Removing International Financial Market Imperfections with Modern Financial Instruments," World Development, Elsevier, vol. 36(9), pages 1514-1530, September.
    18. Honohan, Patrick, 2008. "Cross-country variation in household access to financial services," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2493-2500, November.
    19. Dearmon, Jacob & Grier, Kevin, 2009. "Trust and development," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 210-220, August.
    20. Richard Grabowski, 1998. "Development, markets and trust," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(3), pages 357-371.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    trust; banking; India;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    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:ibn:ijefaa:v:9:y:2017:i:6:p:38-51. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Canadian Center of Science and Education). General contact details of provider: http://edirc.repec.org/data/cepflch.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.