Market discipline by depositors: evidence from reduced form equations
AbstractThis paper examines the effects of the estimated probability of bank failure on the growth rates of large time deposits and interest rates on those deposits. While riskier banks paid higher interest rates, they attracted less large time deposits in the second half of the 1980s. These results indicate that risky banks faced unfavorable supply schedules of large time deposits and, hence, support the presence of market discipline by large time depositors. The empirical analysis also considers the effects of bank size, but fails to find evidence that depositors preferred large banks.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1994-023.
Date of creation: 1994
Date of revision:
Publication status: Published in Quarterly Review of Economics & Finance, 1995 special issue
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- Helder Mendonça & Renato Villela Loures, 2009. "Market discipline in the Brazilian banking industry: an analysis for the subordinated debt holders," Journal of Regulatory Economics, Springer, vol. 36(3), pages 286-307, December.
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