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An empirical study of depositor sensitivity to bank risk

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  • 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
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    References listed on IDEAS

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