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Deposit structure, market discipline, and ownership type: Evidence from Indonesia

Irwan Trinugroho, Putra Pamungkas, Mochammad Doddy Ariefianto and Amine Tarazi

Economic Systems, 2020, vol. 44, issue 2

Abstract: In this paper, we extend the literature on the discipline imposed by depositors on banks by disentangling the impact of macro risk and micro risk. We also take advantage of a unique dataset in which depositors are split into different categories of deposit size in different types of banks (bank ownership structure). We consider the Banking Stability Index, which is used by the Indonesia Deposit Insurance Corporation as a dashboard to monitor banking stability at the country level as well as individual stability measures such as the Z-score. Using monthly data from 2005 to 2013, our findings show that both macro and micro levels of risk are considered by depositors to discipline banks. Large uninsured depositors are more effective at disciplining banks, highlighting the credibility of the insurance system that is in place. Bank ownership type also matters in explaining the difference in market discipline by depositors.

Keywords: Deposit structure; Market discipline; Banking stability index; Ownership; Indonesia (search for similar items in EconPapers)
Date: 2020
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Working Paper: Deposit Structure, Market Discipline, and Ownership Type: Evidence from Indonesia (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:44:y:2020:i:2:s0939362518304692

DOI: 10.1016/j.ecosys.2020.100758

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