Prague Economic Papers 2024, 33(3):277-318 | DOI: 10.18267/j.pep.862

Hidden Consequences of Consumer Protection on the Financial Market: Regulation-introduced Bias

Jiří Šindelář ORCID..., Petr Budinský ORCID...
University of Finance and Administration, Prague, Czech Republic

This paper deals with the problem of how the risk perception among retail customers is affected by the consumer protection regulation on the financial market. Through a questionnaire survey, we have measured the effect of selected consumer protection measures on banking or investment decisions taken by a young (student) population. These measures included the most common elements of financial regulation, such as bank deposit insurance, corporate bond prospectus, licenced fund management and securities broker indemnity insurance. Our results show that protective state intervention represents strong stimuli for customer decision-making with a widely misleading effect. It overshadows other factors, including individual qualification, risk-reward preference and demographic attributes, all of which were found to be insignificant. Since the surveyed measures reached a similar level of effect yet they offer different substance, this outcome has important policymaking implications.

Keywords: financial regulation, consumer behaviour, consumer protection, behavioural finance, capital market
JEL classification: D12, D18, G18, G41

Received: November 10, 2023; Revised: March 9, 2024; Accepted: April 22, 2024; Published: June 28, 2024  Show citation

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Šindelář, J., & Budinský, P. (2024). Hidden Consequences of Consumer Protection on the Financial Market: Regulation-introduced Bias. Prague Economic Papers, 33(3), 277-318. doi: 10.18267/j.pep.862
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