EconPapers    
Economics at your fingertips  
 

Market discipline during crisis: Evidence from bank depositors in transition countries

Iftekhar Hasan (), Krzysztof Jackowicz, Oskar Kowalewski () and Lukasz Kozlowski

No 21/2013, BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition

Abstract: The Central European banking industry is dominated by foreign-owned banks. During the recent crisis, for the first time since the transition, foreign parent companies were frequently in a worse financial condition than their subsidiaries. This situation created a unique opportunity to study new aspects of market discipline exercised by non-financial depositors. Using a comprehensive data set, we find that the recent crisis did not change the sensitivity of deposit growth rates to accounting risk measures. We establish that depositors' actions were more strongly influenced by negative press rumors concerning parent companies than by fundamentals. The impact of rumors was especially perceptible when rumors turned out ex post to be founded. Additionally, we document that public aid announcements were primarily interpreted by depositors as confirmation of a parent company's financial distress. Our results, indicating that depositors react rationally to sources of information other than financial statements, have policy implications, as depositor discipline is usually the only viable and universal source of market discipline for banks in emerging economies. JEL classification: G21; G28. Keywords: depositor behavior; market discipline; crisis; emerging markets; market rumors

JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2013-08-14
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33) Track citations by RSS feed

Published in Published in Journal of Banking & Finance, Volume 37, Issue 12, December 2013, Pages 5436–5451

Downloads: (external link)
https://helda.helsinki.fi/bof/bitstream/123456789/8123/1/172488.pdf (application/pdf)

Related works:
Journal Article: Market discipline during crisis: Evidence from bank depositors in transition countries (2013) Downloads
Working Paper: Market Discipline during Crisis: Evidence from Bank Depositors in Transition Countries (2012) Downloads
Working Paper: Market Discipline during Crisis: Evidence from Bank Depositors in Transition Countries (2012) Downloads
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: https://EconPapers.repec.org/RePEc:bof:bofitp:2013_021

Access Statistics for this paper

More papers in BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland. Contact information at EDIRC.
Bibliographic data for series maintained by Minna Nyman ().

 
Page updated 2019-10-16
Handle: RePEc:bof:bofitp:2013_021