Trust and investment loss: evidence from uk financial corporate failures
File(s)
Accepted version
Author(s)
Kosova, Renata
Michaelides, Alex
Type
Journal Article
Abstract
How does experiencing direct investment loss affect individuals’ trust in the financial system? Exploiting recent UK corporate financial failures that generated press headlines, government debates and institutional criticisms, we design and analyse a survey involving investors in these failures. We find that direct exposure to investment losses significantly reduces trust in financial markets, regulators, big audit firms, and the likelihood of future risky asset market participation. Moreover, trust loss is not fully reversible even with possible compensation. Individual characteristics are not the key drivers of trust losses/gains either. We also survey master’s students exposed to reading about these failures. Information about losses of others reduces trust but less than direct experience. Overall, our results emphasize the role of personal experience in determining trust and future investment decisions.
Date Issued
2027
Date Acceptance
2026-08-28
Citation
Journal of Financial Literacy and Wellbeing, ,forthcoming
ISSN
2753-3212
Publisher
Cambridge University Press
Journal / Book Title
Journal of Financial Literacy and Wellbeing
Volume
,forthcoming
Copyright Statement
Subject to copyright. This paper is embargoed until publication. Once published the author’s accepted manuscript will be made available under a CC-BY License in accordance with Imperial’s Research Publications Open Access policy (www.imperial.ac.uk/oa-policy).
Edition
forthcoming
Publication Status
Accepted