Economics at your fingertips  

Do Depositors Discipline Banks and Did Government Actions During the Recent Crisis Reduce this Discipline? An International Perspective

Allen Berger () and Rima Turk-Ariss ()
Authors registered in the RePEc Author Service: Rima Turk Ariss

Journal of Financial Services Research, 2015, vol. 48, issue 2, 103-126

Abstract: The recent financial crisis highlights the importance of both regulatory and market discipline. Government reactions to the crisis included expanding deposit insurance coverage and rescuing troubled institutions, including some institutions that might not otherwise be considered too important to fail. These actions may have the unintended consequence of a reduction in market discipline that might otherwise penalize banks for risk-taking behavior. Alternatively, market discipline may have increased during the crisis due to heightened awareness of the risks of bank failures. To address these issues, we first test for the presence of depositor discipline effects in the period leading up to the financial crisis in both the US and the EU. Second, we test whether depositor discipline decreased or increased during the crisis. We find significant depositor discipline prior to the crisis in both the US and EU, but this varies between the US and the EU as well as with banking organization size and with listed versus unlisted status. We also find that depositor discipline mostly decreased during the crisis, except for the case of small US banks. Copyright Springer Science+Business Media New York 2015

Keywords: G21; G28; Market discipline; Depositor discipline; Banks (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Journal of Financial Services Research is currently edited by Haluk Unal

More articles in Journal of Financial Services Research from Springer, Western Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-04-07
Handle: RePEc:kap:jfsres:v:48:y:2015:i:2:p:103-126