Deposit Insurance and Depositor Discipline: Direct Evidence on Bank Switching Behavior in Japan
AbstractAs Japan's financial system moves toward a more market oriented one, depositor discipline is expected to play a larger role in the monitoring of the country's banks. Relying on detailed survey data on households' bank switching behavior matched with banks' financial data, we examine households' response to bank risk and different deposit insurance schemes. We find that bank switching in response to risk was more frequent in 2001 than in 1996 and that households' choice of bank provides an adequate reflection of banks' financial health. We also examine the determinants of households' knowledge of the deposit insurance scheme and find that income, the amount of households' financial assets, and educational attainment are all significant factors. What is more, households' extent of knowledge regarding the deposit insurance scheme was an important determinant of bank switching behavior. The results suggest that depositor discipline appears to work and could play an important supplementary role in monitoring the banking sector.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Hi-Stat Discussion Paper Series with number d05-125.
Date of creation: Oct 2005
Date of revision:
depositor discipline; deposit insurance; pay-off; dopositor-level data;
Other versions of this item:
- Noriko Inakura & Satoshi Shimizutani, 2010. "Deposit insurance and depositor discipline: direct evidence on bank switching behaviour in Japan," Applied Economics, Taylor & Francis Journals, vol. 42(26), pages 3401-3415.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-12 (All new papers)
- NEP-FIN-2005-11-12 (Finance)
- NEP-FMK-2005-11-12 (Financial Markets)
- NEP-IAS-2005-11-12 (Insurance Economics)
- NEP-SEA-2005-11-12 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Depositinsurance around the globe : where does it work?,"
Policy Research Working Paper Series
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- Noriko Inekura & Satoshi Shimizutani, 2005. "Yokin Hoken Seido, Pay-off Kaikin to Yokishakiritsu: Kakei no Microdata ni yoru azukekaekoudou no kensho (in Japanese)," Hi-Stat Discussion Paper Series d05-83, Institute of Economic Research, Hitotsubashi University.
- Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 273-305, August.
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