Misled and mis-sold: financial misbehaviour in retail banks?

Sane, Renuka; Halan, Monika

doi:10.1016/j.jce.2017.06.001

Cited by 9 publications

(4 citation statements)

References 21 publications

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“…One reason for the slowdown in PMS sales after 2019–20 was the ban on upfront PMS products, effective from May 1, 2020 (refer to Figure 1). Financial services firms provide higher sales incentives to staff, which are linked to the higher upfront commission in financial (such as insurance) products (Sane and Halan, 2017).…”

Section: Results and Discussion–univariate Analyses And Multivariate ...mentioning

confidence: 99%

Do changes in distributors' incentive structure drive mutual fund flows?

Sandhu¹,

Deb²

2023

IJBM

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PurposeThis study estimates the impact of changes in the mutual fund distributor incentive structure on distributor-advised mutual fund flows. The authors employ two recent major policy interventions by the Indian self-regulatory authority and the financial market regulator – one partial ban and another complete ban on upfront commissions – paid to mutual fund distributors on distributor-advised mutual fund flows.Design/methodology/approachThe authors use novel distributor-level data across the 198 largest distributors in India between 2013 and 2020 and a series of pooled panel random-effect generalized least squares models with robust standard errors to explore the effect of changes of distributor commissions on distributor assets-under-management (AUM), gross sales, commissions and changes (%) in the number of investors in alternate investment avenues like portfolio management services (PMS).FindingsChanges in the incentive structure have a significant negative effect on mutual fund flows at an aggregate level and within MF distributor categories. A significant diversion of investor funds toward PMS is noted, which paid higher upfront commissions to distributors during the same period.Practical implicationsThe authors posit that these two developments are not mutually independent and that both fall out of the aforementioned policy changes by Securities and Exchange Board of India and Association of Mutual Funds in India. The study findings have implications for all stakeholders in the Indian mutual fund industry and, by extension, for Indian and global alternative investment avenues.Originality/valueThis study is the first to explore the effects of these two major policy interventions by regulators on mutual fund flows in India.

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Section: Results and Discussion–univariate Analyses And Multivariate ...mentioning

confidence: 99%

Do changes in distributors' incentive structure drive mutual fund flows?

Sandhu¹,

Deb²

2023

IJBM

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“…Such situation may in turn result in discouragement from using financial services and a decline in trust in the financial sector (Frączek, 2017). Lack of information or misinformation between the consumer and the professional financial services provider causes information asymmetry (Cyman, 2016;Sane & Halan, 2017) identified as a source of potential threats. Information asymmetry can give rise to certain consequences such as adverse selection and moral hazard associated with the unfair use of market advantage (Cyman, 2016).…”

Section: Information As a Means Of Protection In The Financial Marketmentioning

confidence: 99%

Information as a Consumer Protection Instrument on the Consumer Credit Market

Czechowska,

Paduszyńska,

Jędrzejczak

et al. 2024

TEDE

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The aim of the article was to assess the opinions of consumer credit borrowers on the information message provided to them by lenders at the pre-contractual stage. The opinions were presented in the context of the demographic characteristics of the respondents. The research question posed was whether, taking into account demographic characteristics, the assessment of consumer credit borrowers regarding the information message obtained at the pre-contractual stage varied. The research methodology included a questionnaire and Computer-Assisted Telephone Interviewing (CATI). For the information analysis, we employed the following non-parametric tests: the chi-square test of independence, the Mann–Whitney U test and the Kruskal–Wallis H test. No significant differences were observed in all the parameters of the assessment of the information message, which means that the answer to the research question was negative. The findings suggest that even though borrowers may positively assess the compliance with the information obligations by lenders, it does not mean that all credit decisions made were rational and appropriate to their financial situation. Our study focused on the consumer protection and employed non-parametric tests to analyze the consumer credit borrowers’ assessment of the information provided to them by lenders.

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“…Under the first theme, unethical practices are analysed as explicit, intentional and consciously planned actions that encompass the service encounter (Veetkazhi et al. , 2020; Sane and Halan, 2017). Such a negative banks-consumers relations are emerging when ethical standards are voluntarily violated for the banks’ gain.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

When unethical practices harm relationship outcomes: testing the influence of consumer-perceived unethical behaviour on trust and satisfaction in the banking sector

Kanyurhi,

Bugandwa Mungu Akonkwa,

Murhula Lusheke

et al. 2024

IJBM

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PurposeThe study has two objectives: (1) expand our knowledge of the relationship between unethical behaviour and both trust and satisfaction and (2) demonstrate that unethical behaviour research should be examined multi-dimensionally.Design/methodology/approachData were collected by resorting to a mixed methods approach. First, individual interviews were performed with 31 bank consumers from six main commercial banks in Bukavu city in the Democratic Republic of the Congo. Interview notes were submitted for content analysis to identify items and components that underpin the unethical practices construct. Second, a quantitative survey was conducted with 410 consumers from the same six banks. An aggregated-disaggregated structural equations modelling approach was used to test the impact of unethical practices on relationship outcomes through two studies. Study 1 tested a model that links unethical behaviour as a one-dimensional construct to trust and satisfaction. Study 2 tested a model that directly connects the four specific unethical behaviour components to both trust and satisfaction.FindingsResults from study 1 reveal that perceived unethical behaviour negatively influences consumer trust. Results also confirm that trust positively influences customer satisfaction. Results from study 2 confirm that unresponsive, disrespect and lying behaviours negatively influence both trust and satisfaction. Banks which are involving in those specific unethical behaviours can neither satisfy their consumers, nor maintain a sustainable and profitable relationship with them. Therefore, unethical behaviours harm the relationships outcomes in the banking sector.Research limitations/implicationsThe perceived unethical behaviour scale derives from a single data set and its reliability and validity need to be improved. Relationships between constructs are tested in a more direct way and ignore moderating variables. Perceived unethical behaviour is connected to relationship outcome variables while its impact on firms’ metrics have been ignored.Practical implicationsBanks have to understand customers’ perception of unethical behaviours and find a way to overcome them. Banks should recruit, motivate and retain employees who demonstrate an ethical inclination in the service encounter and create structures and mechanisms in order to monitor and manage unethical practices.Social implicationsBanks employees' unethical behaviour and practices not only damage the trust and reputation of banks but also can lead to frustration on the part of customers and damage their relationship with the institution. Our paper is a warning of this danger and might improve the social interactions between organisations (in general) and customers.Originality/valueUnethical behaviour is measured with a four-component scale in contrast to previous studies that have used bi-dimensional or one-dimensional scales. The study tests a disaggregated model that links four components of perceived unethical behaviour to relationship outcome variables. Perceived unethical behaviours are analysed from the customers’ perspective by resorting to mixed methods strategy.

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Misled and mis-sold: financial misbehaviour in retail banks?

Cited by 9 publications

References 21 publications

Do changes in distributors' incentive structure drive mutual fund flows?

Do changes in distributors' incentive structure drive mutual fund flows?

Information as a Consumer Protection Instrument on the Consumer Credit Market

When unethical practices harm relationship outcomes: testing the influence of consumer-perceived unethical behaviour on trust and satisfaction in the banking sector

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