IDEAS home Printed from https://ideas.repec.org/a/spr/jecfin/v24y2000i1p15-27.html

An empirical study of depositor sensitivity to bank risk

Author

Listed:
  • Jacqueline Khorassani

Abstract

Using a cross-sectional data set on U.S. commercial banks, the argument that during the mid 1980s to early 1990s depositors were insensitive to bank risk is empirically examined. Bank risk is measured by the predicted probability of bank failure as a function of contributing factors. The natural log of bank deposits is then regressed on bank risk and other control variables. The coefficient on bank risk in this equation measures the sensitivity of deposits to bank risk. A close examination of the estimated coefficient on bank risk offers little support for the argument that depositors were insensitive to bank risk. Copyright Springer 2000

Suggested Citation

  • Jacqueline Khorassani, 2000. "An empirical study of depositor sensitivity to bank risk," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(1), pages 15-27, March.
    • Handle: RePEc:spr:jecfin:v:24:y:2000:i:1:p:15-27
    DOI: 10.1007/BF02759692
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF02759692
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/BF02759692?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Sinkey, Joseph F, Jr, 1975. "A Multivariate Statistical Analysis of the Characteristics of Problem Banks," Journal of Finance, American Finance Association, vol. 30(1), pages 21-36, March.
    2. William R. Emmons, 1993. "Increased risk-taking versus local economic conditions as causes of bank failures," Proceedings 408, Federal Reserve Bank of Chicago.
    3. Robert B. Avery & Gerald A. Hanweck, 1984. "A dynamic analysis of bank failures," Research Papers in Banking and Financial Economics 74, Board of Governors of the Federal Reserve System (U.S.).
    4. White, Lawrence J, 1989. "The Reform of Federal Deposit Insurance," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 11-29, Fall.
    5. Merton, Robert C, 1978. "On the Cost of Deposit Insurance When There Are Surveillance Costs," The Journal of Business, University of Chicago Press, vol. 51(3), pages 439-452, July.
    6. John H. Kareken, 1990. "Deposit insurance reform; or, deregulation is the cart, not the horse," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 14(Win), pages 3-11.
    7. Wheelock, David C, 1992. "Deposit Insurance and Bank Failures: New Evidence from the 1920s," Economic Inquiry, Western Economic Association International, vol. 30(3), pages 530-543, July.
    8. Edward J. Kane, 1985. "The Gathering Crisis in Federal Deposit Insurance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611856, December.
    9. Grossman, Richard S, 1992. "Deposit Insurance, Regulation, and Moral Hazard in the Thrift Industry: Evidence from the 1930's," American Economic Review, American Economic Association, vol. 82(4), pages 800-821, September.
    10. Brewer, Elijah, III & Mondschean, Thomas H, 1994. "An Empirical Test of the Incentive Effects of Deposit Insurance: The Case of Junk Bonds at Savings and Loan Associations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 146-164, February.
    11. Wheelock David C. & Kumbhakar Subal C., 1994. "The Slack Banker Dances: Deposit Insurance and Risk-Taking in the Banking Collapse of the 1920s," Explorations in Economic History, Elsevier, vol. 31(3), pages 357-375, July.
    12. Kareken, John H & Wallace, Neil, 1978. "Deposit Insurance and Bank Regulation: A Partial-Equilibrium Exposition," The Journal of Business, University of Chicago Press, vol. 51(3), pages 413-438, July.
    13. Jaffee, Dwight M, 1989. "Symposium on Federal Deposit Insurance for S&L Institutions," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 3-9, Fall.
    14. Kareken, John H, 1983. "The First Step in Bank Deregulation: What about the FDIC?," American Economic Review, American Economic Association, vol. 73(2), pages 198-203, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Umi Widyastuti & Erie Febrian & Sutisna & Tettet Fitrijanti, 2019. "Factors Explaining the Market Discipline of Sharia Mutual Funds from a Behavioural Finance Perspective: A Theoretical Approach," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 198-212.
    2. Hadad, Muliaman D. & Agusman, Agusman & Monroe, Gary S. & Gasbarro, Dominic & Zumwalt, James Kenton, 2011. "Market discipline, financial crisis and regulatory changes: Evidence from Indonesian banks," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1552-1562, June.
    3. Jo-Hui Chen & Chih-Sean Chen, 2011. "The effects of international off-site surveillance on bank rating changes," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(6), pages 1313-1329, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karels, Gordon V. & McClatchey, Christine A., 1999. "Deposit insurance and risk-taking behavior in the credit union industry," Journal of Banking & Finance, Elsevier, vol. 23(1), pages 105-134, January.
    2. Agusman, Agusman & Cullen, Grant S. & Gasbarro, Dominic & Monroe, Gary S. & Zumwalt, J. Kenton, 2014. "Government intervention, bank ownership and risk-taking during the Indonesian financial crisis," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 114-131.
    3. Diana Hancock, 1996. "Measuring the efficiency of financial institutions: the importance of choosing a frontier," Proceedings 502, Federal Reserve Bank of Chicago.
    4. Jane W. D'Artista, 1996. "What should regulators do in the age of money managers?," Proceedings 488, Federal Reserve Bank of Chicago.
    5. J. S. Butler & Barry Schachter, 1996. "Improving value-at-risk estimates by combining kernel estimation," Proceedings 513, Federal Reserve Bank of Chicago.
    6. William J. Hanley & Karen McCann & James T. Moser, 1996. "Reconsidering regulatory standards for clearing and settlement systems," Proceedings 517, Federal Reserve Bank of Chicago.
    7. Darryll Hendricks, 1996. "Evaluation of value-at-risk models using historical data," Proceedings 512, Federal Reserve Bank of Chicago.
    8. John D. Hawke, 1996. "Bank structure and competition and pending legislation," Proceedings 484, Federal Reserve Bank of Chicago.
    9. Verne G. Istock, 1996. "The inevitability of consolidation," Proceedings 498, Federal Reserve Bank of Chicago.
    10. Gregory R. Duffee, 1996. "Rethinking risk management for banks: lessons from credit derivatives," Proceedings 514, Federal Reserve Bank of Chicago.
    11. Joel F. Houston & Christopher M. James, 1996. "Banking relationships, financial constraints, and investment: are bank- dependent borrowers more financially constrained?," Proceedings 506, Federal Reserve Bank of Chicago.
    12. Stephen Brobeck, 1996. "Bank consolidation and the consumer," Proceedings 499, Federal Reserve Bank of Chicago.
    13. Carmine DiNoia, 1994. "Structuring Deposit Insurance in Europe: Some Considerations and a Regulatory Game," Center for Financial Institutions Working Papers 94-31, Wharton School Center for Financial Institutions, University of Pennsylvania.
    14. Gary Gorton & Andrew Winton, 1996. "The social costs of bank capital," Proceedings 518, Federal Reserve Bank of Chicago.
    15. Rebel A. Cole & Hamid Mehran, 1996. "The effect of changes in ownership structure on performance of public companies," Proceedings 495, Federal Reserve Bank of Chicago.
    16. Thomas K. Brown, 1996. "Bank consolidation and shareholder value," Proceedings 500, Federal Reserve Bank of Chicago.
    17. Glenn B. Canner & Wayne Passmore, 1996. "The relative profitability of commercial banks active in lending in lower-income borrowers," Proceedings 522, Federal Reserve Bank of Chicago.
    18. Charles W. Calomiris & Berry Wilson, 2004. "Bank Capital and Portfolio Management: The 1930s "Capital Crunch" and the Scramble to Shed Risk," The Journal of Business, University of Chicago Press, vol. 77(3), pages 421-456, July.
    19. Joseph P. Hughes & William W. Lang & Loretta J. Mester & Choon-Geol Moon, 1996. "Safety in numbers? Geographic diversification and bank insolvency risk," Working Papers 96-14, Federal Reserve Bank of Philadelphia.
    20. George J. Benston, 1996. "What should bank regulators do? Why should regulators do anything?," Proceedings 490, Federal Reserve Bank of Chicago.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jecfin:v:24:y:2000:i:1:p:15-27. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.