Based on stakeholders’ theory, our paper investigates the relationship between customer complaints and bank performance. We use a unique hand-collected database of customer complaints published by the banking and financial ombudsman and the financial data of the universe of Italian banks during the 2010–2017 period and employ a fixed effect panel data model and two-step system GMM estimation. We first confirm that higher complaints scaled by bank size reduce profitability and increase bank risk. Then, we show that bank institutional form affects this outcome. In contrast to cooperative banks, the performance of commercial banks is negatively influenced by customer complaints. Moreover, in contrast to medium and large banks, small banks’ profitability is not affected by customer complaints. We also found that a bank’s decision to settle customer complaints has a positive impact in the long run. The results are consistent when using normalized variables for size and different robustness checks. Consequently, managerial and policy implications related to customer complaints are proposed. Indeed, commercial banks must protect relational capital with customers by strengthening dialogue among the compliance function, complaints office and commercial areas to proactively manage the risk of complaints and improve performance. Policy makers should enhance banking transparency and simultaneously promote greater financial education of clients, which can foster trust in banks and their stability.

Cotugno, M., Stefanelli, V., Management customer complaints and performance: banks, be careful!, <<THE JOURNAL OF MANAGEMENT AND GOVERNANCE>>, 2023; 2023 (27): 371-412. [doi:10.1007/s10997-021-09616-3] [https://hdl.handle.net/10807/226672]

Management customer complaints and performance: banks, be careful!

Cotugno, Matteo
;
2023

Abstract

Based on stakeholders’ theory, our paper investigates the relationship between customer complaints and bank performance. We use a unique hand-collected database of customer complaints published by the banking and financial ombudsman and the financial data of the universe of Italian banks during the 2010–2017 period and employ a fixed effect panel data model and two-step system GMM estimation. We first confirm that higher complaints scaled by bank size reduce profitability and increase bank risk. Then, we show that bank institutional form affects this outcome. In contrast to cooperative banks, the performance of commercial banks is negatively influenced by customer complaints. Moreover, in contrast to medium and large banks, small banks’ profitability is not affected by customer complaints. We also found that a bank’s decision to settle customer complaints has a positive impact in the long run. The results are consistent when using normalized variables for size and different robustness checks. Consequently, managerial and policy implications related to customer complaints are proposed. Indeed, commercial banks must protect relational capital with customers by strengthening dialogue among the compliance function, complaints office and commercial areas to proactively manage the risk of complaints and improve performance. Policy makers should enhance banking transparency and simultaneously promote greater financial education of clients, which can foster trust in banks and their stability.
2023
Inglese
Cotugno, M., Stefanelli, V., Management customer complaints and performance: banks, be careful!, <<THE JOURNAL OF MANAGEMENT AND GOVERNANCE>>, 2023; 2023 (27): 371-412. [doi:10.1007/s10997-021-09616-3] [https://hdl.handle.net/10807/226672]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/226672
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