Is Financial Fragility a Matter of Illiquidity? An Appraisal for Italian Households

Brunetti, Marianna; Giarda, Elena; Torricelli, Costanza

doi:10.1111/roiw.12189

Cited by 80 publications

(57 citation statements)

References 34 publications

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“…Against these two drivers stand factors that instead have an impeding effect on the consumer, hindering factors making a switch of bank less likely. One such hindering factor is the level of perceived financial stability of the service provider, or rather the combination of difficulties to judge a priori if a provider is financially solvent or not, together with the importance of financial stability as such (Brunetti et al, 2016). This impediment contains a long-term perspective, and focuses on the predictability of the service provider (van Esterik-Plasmeijer and van Raaij, 2017).…”

Section: Ijbm 376mentioning

confidence: 99%

Reasons to switch: empowered vs less powerful bank customers

Hauff

2019

IJBM

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Purpose The purpose of this paper is to contribute to the existing literature of driving and impeding switching factors by operationalizing the catalyst factor of perceived power among customers. Acknowledging the importance of trust in a financial context, a trust-based framework for the analysis is used. The study explicitly analyzes factors of importance for subsequent switching of banks for empowered customers (i.e. savers) and low-on-power customers (i.e. borrowers). Design/methodology/approach The study measures factors driving or impeding switch of service provider, together with measures of trust and power using online survey methods. The sample is intended to focus on savers and borrowers, defined quantitatively as well as perception wise. Through a multi-group SEM analysis, differences between the samples of savers and borrowers are analyzed. The dependent variable was in both cases inclination to switch. Findings The paper manages to define differences between empowered and less empowered customers, such as borrowers and savers. The mediating effect of trust prevails only for borrowers: here, the only effect on switching behavior stems from a full mediation of stability through trust. For savers, direct influences of both service failure and lack of involvement on trust are of major importance. The importance of trust, however, is lacking; for the sample of savers, the link between trust and switching behavior is insignificant. Practical implications The results may be used as a tool box in order to address consumer switching behavior and mobility in the financial services market. The biggest obstacle for switching banks among savers is the low level of involvement. This has clear implications regarding how to increase switching, e.g., by raising interest. Focusing instead on borrowers, stability of the chosen financial institution turned out to be the most important factor. Originality/value This paper introduces a view on consumer switching behavior, taking into account differences regarding service provider relations (empowered savers vs less empowered borrowers) and the importance of trust in these two settings. The paper introduces trust as a mediator between switching behavior and four determinants: stability, personal relations, service failure and internet-related issues, and involvement.

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Section: Ijbm 376mentioning

confidence: 99%

Reasons to switch: empowered vs less powerful bank customers

Hauff

2019

IJBM

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“…Anderloni et al (2012) use a more comprehensive definition of household financial fragility in order to take into account not only over-commitment due to excess indebtedness, but also other conditions of financial instability, such as the inability to face the monthly outlay and to balance the budget, arrears in paying utility bills, difficulties in shopping for food or paying the rent. A somewhat different perspective is taken by Brunetti et al (2016) in that financial fragility is an ability to afford expected expenses but lack of sufficient liquidity to face unexpected ones. The latter definition is not at variance with others as those who have some degree of difficulty in keeping up with financial commitments are particularly exposed to adverse financial shock.…”

Section: Household Debt and Financial Fragility Measures And Determinantsmentioning

confidence: 99%

Ethnic disparity in financial fragility in Malaysia

Yusof

2019

IJSE

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Purpose The purpose of this paper is to investigate the extent of financial fragility and its disparity across ethnic groups in Malaysia. Disparities related to income and wealth are major concerns as they breed conflict and social instability. The study also compares the level of financial fragility of Malaysians with their neighboring Asian counterparts. Design/methodology/approach This study uses the World Values Survey to construct two financial fragility measures. Descriptive analysis is used to compare the level of financial fragility of Malaysia with other Asian countries. Ordinary least squares and generalized ordered logit regressions are applied to determine the existence of ethnic disparity in financial fragility in Malaysia. Findings There exist ethnic differences in financial vulnerability in Malaysia where Malay and Indian are in a more financially fragile situation compared to Chinese. Other socio-economic factors and character trait also impact financial fragility. Compared to neighboring countries, the level of financial fragility in Malaysia is low. Nevertheless, over 40 percent of the Malaysians are just getting by in terms of their expenditure relative to income. They may be at risk to financial shocks without adequate savings or funds. Social implications Ethnic disparity in financial vulnerability added to the inequality in income and wealth can pose a serious threat to Malaysia which attempts to achieve long-lasting social harmony and sustainable development. Originality/value This is the first study that attempts to compare the level of individual financial fragility across Asian countries. It also makes use of a larger scale survey and a more representative sample to examine ethnic disparity in financial fragility in Malaysia. In addition, character trait is included in the analysis to provide a better understanding of human behavior in affecting financial outcomes.

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“…5 Interest in the ability of the household to shield itself from susceptibility to shocks through the use of financial markets is, of course, longstanding. However, recent work has been aided by the arrival of more detailed data on household balance sheets (Lusardi et al (2011), Lusardi (2011), Jappelli et al (2013), Ampudia et al (2016), Brunetti et al (2016)) and aims to gauge borrowing capacity and resilience to sudden, unforeseen expenditures. Specifically, this work primarily focuses on measuring the ability of households to remain current on incurred debts, as well as the question of how much borrowing the household could feasibly engage in, within a short term period, e.g., 30 daysespecially to cover an unforeseen "expense" (as opposed to a change in income, say).…”

Section: Related Workmentioning

confidence: 99%

The Persistence of Financial Distress

Athreya

Mustre-del-Rio

Sánchez

2017

RWP

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Using proprietary panel data, we show that many US consumers experience financial distress (35% when distress is defined by having debt in severe delinquency, e.g.) at some point in their lives. However, most distress events are concentrated among a much smaller proportion of consumers in persistent trouble: fewer than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of unsecured debt with informal default that accommodates a simple form of heterogeneity in time preference.

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Is Financial Fragility a Matter of Illiquidity? An Appraisal for Italian Households

Cited by 80 publications

References 34 publications

Reasons to switch: empowered vs less powerful bank customers

Reasons to switch: empowered vs less powerful bank customers

Ethnic disparity in financial fragility in Malaysia

The Persistence of Financial Distress

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