Reputational Risk and Conflicts of Interest in Banking and Finance: The Evidence so Far

36 Pages Posted: 21 Dec 2006

See all articles by Ingo Walter

Ingo Walter

New York University - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: December 20, 2006

Abstract

This paper attempts define reputational risk in financial intermediation and to identify the proximate sources of reputational risk facing financial services firms. It then considers the key drivers of reputational risk in the presence of transactions costs and imperfect information in financial markets, surveys empirical research in the literature on the impact of reputational losses imposed on financial intermediaries, and presents some new empirical findings. The paper then develops the link between reputational risk and exploitation of conflicts of interest in financial intermediation, arguably one of the most important threats to the reputational capital of financial firms. Finally, it considers some managerial requisites for dealing with both reputational risk and conflicts of interest.

Keywords: Operational Risk, Reputation, Conflicts of Interest, Scope Diseconomies in Banking

JEL Classification: G2, K2, L14

Suggested Citation

Walter, Ingo, Reputational Risk and Conflicts of Interest in Banking and Finance: The Evidence so Far (December 20, 2006). Available at SSRN: https://ssrn.com/abstract=952682 or http://dx.doi.org/10.2139/ssrn.952682

Ingo Walter (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

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New York University (NYU) - Department of Finance

Stern School of Business
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New York, NY 10012-1126
United States

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