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Depositor Market Discipline: New Evidence from Selling Failed Banks

Author

Listed:
  • Philip Molyneux

    (Bangor Business School, Bangor University)

  • Vineet Upreti

    (School of Management, Swansea University)

  • Tim Zhou

    (School of Management, Swansea University)

Abstract

This paper studies depositor behavior following the acquisition of failed banks by healthy banks in FDIC-supervised transactions. Using a US bank branch-based dataset spanning 2007 to 2014 we find that failed bank depositors discipline acquiring banks post-resolution. This appears to be related to features of the acquiring banks’ asset quality and loan composition, but it may also be linked to irrational desciplinary behavior or post acquisition integration issues. We also find some evidence that depositor market discipline may have an impact on the competitive fetaures of local banking markets post resolution.

Suggested Citation

  • Philip Molyneux & Vineet Upreti & Tim Zhou, 2022. "Depositor Market Discipline: New Evidence from Selling Failed Banks," Working Papers 2022-03, Swansea University, School of Management.
    • Handle: RePEc:swn:wpaper:2022-03
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    References listed on IDEAS

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    More about this item

    Keywords

    FDIC; Banks; Resolution; Market Discipline; Depositors;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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