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Depositors Discipline through Interest Costs during Good and Bad Times: the Role of the Guarantor of Last Resort1

Krzysztof Jackowicz (), Oskar Kowalewski () and Łukasz Kozłowski ()
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Krzysztof Jackowicz: Kozminski University
Łukasz Kozłowski: Kozminski University

Journal of Financial Services Research, 2018, vol. 54, issue 2, No 2, 179-205

Abstract: Abstract We investigate whether the public sector’s ability as the guarantor of last resort (GLR) to help banks or to guarantee banks’ liabilities affects the sensitivity of interest costs to bank fundamentals. We use a global bank sample and find that the sensitivity is an increasing function of GLR risk, regardless of the method applied to describe this risk. Therefore, our results indicate that increased levels of GLR risk might foster market monitoring by depositors.

Keywords: Depositor discipline; Banking; Financial stability; Crisis (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10693-016-0266-x

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