Premium
Financial knowledge and trust in financial institutions
Author(s) -
Cruijsen Carin,
Haan Jakob,
Roerink Ria
Publication year - 2021
Publication title -
journal of consumer affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.582
H-Index - 62
eISSN - 1745-6606
pISSN - 0022-0078
DOI - 10.1111/joca.12363
Subject(s) - financial literacy , proxy (statistics) , scope (computer science) , business , financial institution , finance , blind trust , express trust , accounting , public relations , political science , machine learning , computer science , programming language
Abstract Based on analysis of 14 years of data on Dutch consumers' trust in financial institutions, we find that financially literate consumers are more likely to trust banks, insurance companies and pension funds. This result applies both to broad‐scope trust (trust in financial institutions in general) and narrow‐scope trust (trust in one's own financial institution). Our conclusion holds when we use a financial literacy proxy based on self‐assessed knowledge or a proxy based on actual knowledge. For all types of financial institutions researched, we find that narrow‐scope trust is significantly higher than broad‐scope trust, but both forms of trust are positively related. Financially knowledgeable people are more likely to trust managers of financial institutions and have more trust in the prudential supervisory authority. Finally, our results suggest that trust in the supervisory authority positively correlates with trust in the financial sector.