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Deposit Structure, Market Discipline, and Ownership Type: Evidence from Indonesia

Author

Listed:
  • Irwan Trinugroho

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Putra Pamungkas

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Mochammad Doddy Ariefianto

    (c Indonesia Deposit Insurance Corporation, Equity Tower Lt 20-21, Sudirman Central Business District (SCBD) lot 9, Jalan Jendral Sudirman Kav. 52-53, Jakarta 12190, Indonesia)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

In this paper, we extend the literature on the discipline imposed by depositors to banks by disentangling the impact of macro risk and micro risk. We also take advantage of a unique dataset in which depositors are split into different categories of deposit size in different types of banks (bank ownership structure). We consider the Banking Stability Index, which is used by the Indonesia Deposit Insurance Corporation as a dashboard to monitor the banking stability at the country level as well as individual stability measures such as the Z-score. Using monthly data from 2005 to 2013 our findings show that both macro and micro levels of risk are considered by depositors to discipline banks. Large uninsured depositors are more effective in disciplining banks highlighting the credibility of the insurance system in place. Bank ownership type also matters in explaining the difference in market discipline by depositors.

Suggested Citation

  • Irwan Trinugroho & Putra Pamungkas & Mochammad Doddy Ariefianto & Amine Tarazi, 2019. "Deposit Structure, Market Discipline, and Ownership Type: Evidence from Indonesia," Post-Print hal-02132626, HAL.
    • Handle: RePEc:hal:journl:hal-02132626
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    2. Zhao, Jing & Gao, Yaqin & Zhao, Lijuan, 2024. "How does deposit insurance affect household's risk sensitivity？Evidence from China," Research in International Business and Finance, Elsevier, vol. 67(PB).
    3. Rihab Grassa & Nejia Moumen & M. Kabir Hassan & Khaled Hussainey, 2022. "Market discipline and capital buffers in Islamic and conventional banks in the MENA region," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 139-167, March.
    4. Alamsyah, Halim & Ariefianto, Moch. Doddy & Saheruddin, Herman & Wardono, Seto & Trinugroho, Irwan, 2020. "Depositors’ trust: Some empirical evidence from Indonesia," Research in International Business and Finance, Elsevier, vol. 54(C).
    5. Tran, Dung Viet & Hussain, Nazim & Nguyen, Duc Khuong & Nguyen, Trung Duc, 2024. "How do depositors respond to banks' discretionary behaviors? Evidence from market discipline, deposit insurance, and scale effects," International Review of Financial Analysis, Elsevier, vol. 93(C).
    6. Saheruddin, Herman & Soedarmono, Wahyoe, 2022. "Do board size, institutional ownership and external auditors matter to market discipline in Indonesian banking?," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 389-395.
    7. Aldy Fariz Achsanta & Tastaftiyan Risfandy & Putra Pamungkas & Irwan Trinugroho & Herman Saheruddin, 2021. "Related bank deposits: Good or bad for stability?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 735-751, December.

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