Illegal activities of financial intermediaries: A burden of trust crisis

Abstract

Based on the explication of structural and functional relations, a scientifically methodical approach to modeling the relationship between financial intermediaries' illegal activities, the trust crisis in the financial sector, and its deformations have been developed. Based on the construction and analysis of the relevant structural equations, it has been empirically confirmed that the probability of financial intermediaries' involvement in shadow transactions increases with the aggravation of the trust crisis in the financial sector. Using the tools of the structural equations modeling, a mediator analysis was performed, Received: April, 2020 1st Revision: June, 2020 Accepted: March, 2021 DOI: 10.14254/20718330.2021/14-1/12 Journal of International Studies S ci en ti fi c P a pe rs © Foundation of International Studies, 2021 © CSR, 2021 Maryna Brychko, Taras Savchenko, Tetiana Vasylieva, Paweł Piotrowski Illegal activities of financial intermediaries: A burden of trust crisis 173 the results of which confirmed the hypothesis that the financial sectors’ trust crisis contributes to the degeneration of financial institutions and markets with regard to their depth, access, security and efficiency, which, accordingly, results in higher shadow transactions involving financial intermediaries.