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).
A qualitative field study was conducted to collect data from two case-study banks and two key banking industry institutions.
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.
This paper highlights IORs and considers how associated control problems and risks are affected by trust in the context of a large-scale crisis.
The findings provide insights into interbank market practices during the global financial crisis with respect to partner selection and performance control.
The empirical case of the banking industry helps broaden our understanding of inter-IORs.
The author acknowledges foremost the valuable assistance of Gunnar Wahlström in the data collection. Along the research and publication process, Sten Jönsson, Gudrun Baldvinsdottir, Jonny Bergman, the discussant at the Manufacturing Accounting Research Conference 2016 and two anonymous reviewers provided constructive comments and suggestions.
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
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