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Depositors’ Perception of "Too-Big-to-Fail"

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  • Raquel de F. Oliveira
  • Rafael F. Schiozer
  • Lucas A. B. de C. Barros

Abstract

We exploit the exogenous shock to the Brazilian banking system caused by the international turmoil of 2008 and find evidence that the run to systemically important banks is better explained by the perception of a too-big-to-fail policy than by bank fundamentals. We infer that the extra inflow of deposits received by systemically important banks during crises gives them an important competitive advantage. Our analysis also indicates that a bank’s share of funding from institutional investors affects the nonfinancial firms’ and institutional investors’ decision to run.

Suggested Citation

  • Raquel de F. Oliveira & Rafael F. Schiozer & Lucas A. B. de C. Barros, 2015. "Depositors’ Perception of "Too-Big-to-Fail"," Review of Finance, European Finance Association, vol. 19(1), pages 191-227.
    • Handle: RePEc:oup:revfin:v:19:y:2015:i:1:p:191-227.
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    Cited by:

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    2. Fernando M. Linardi, 2020. "Investors’ Behavior and Mutual Fund Portfolio Allocations in Brazil during the Global Financial Crisis," Working Papers Series 517, Central Bank of Brazil, Research Department.
    3. Lamont K. Black & Ioannis Floros & Rajdeep Sengupta, 2016. "Raising capital when the going gets tough: U.S. bank equity issuance from 2001 to 2014," Research Working Paper RWP 16-5, Federal Reserve Bank of Kansas City.
    4. Allen N. Berger & Martien Lamers & Raluca A. Roman & Koen Schoors, 2020. "Unexpected Effects of Bank Bailouts:Depositors Need Not Apply and Need Not Run," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 20/1005, Ghent University, Faculty of Economics and Business Administration.
    5. Frederico A. Mourad & Rafael F. Schiozer & Toni R. E. dos Santos, 2020. "Bank Loan Forbearance: evidence from a million restructured loans," Working Papers Series 541, Central Bank of Brazil, Research Department.
    6. Gündüz, Yalin, 2020. "The market impact of systemic risk capital surcharges," Discussion Papers 09/2020, Deutsche Bundesbank.
    7. Sümeyra Atmaca & Karolin Kirschenmann & Steven Ongena & Koen Schoors, 2020. "Deposit Insurance, Bank Ownership and Depositor Behavior," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 20/1008, Ghent University, Faculty of Economics and Business Administration.
    8. Zhu, Jiaqing & Li, Guangzhong & Li, Jie, 2017. "Merge to be too big to fail: A real option approach," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 342-353.
    9. Cubillas, Elena & Fernández, Ana I. & González, Francisco, 2017. "How credible is a too-big-to-fail policy? International evidence from market discipline," Journal of Financial Intermediation, Elsevier, vol. 29(C), pages 46-67.
    10. Schiozer, Rafael F. & Oliveira, Raquel de Freitas, 2016. "Asymmetric transmission of a bank liquidity shock," Journal of Financial Stability, Elsevier, vol. 25(C), pages 234-246.

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