The importance of trust for inter-organizational relationships: A study of interbank market practices in a crisis

Abstract

Purpose

This paper aims to examine interbank market practices in a crisis to understand the importance of trust in dealing with control problems and managing risk in inter-organizational relationships (IORs).

Design/methodology/approach

A qualitative field study was conducted to collect data from two case-study banks and two key banking industry institutions.

Findings

The findings illustrate the use of trust-based partner-selection criteria such as guaranteed banks (i.e., banks granted special status by key banking industry institutions) and “clan-related” banks. In addition, the findings present several trust-based performance-control processes regarding the selected counterparties, such as negative expectations, goodwill and information sharing.

Research limitations/implications

This paper highlights IORs and considers how associated control problems and risks are affected by trust in the context of a large-scale crisis.

Practical implications

The findings provide insights into interbank market practices during the global financial crisis with respect to partner selection and performance control.

Originality/value

The empirical case of the banking industry helps broaden our understanding of inter-IORs.

Citation

Rad, A. (2017), "The importance of trust for inter-organizational relationships: A study of interbank market practices in a crisis", Qualitative Research in Accounting & Management, Vol. 14 No. 3, pp. 282-306. https://doi.org/10.1108/QRAM-07-2014-0049