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Market Discipline Across Bank Governance Models. Empirical Evidence from German Depositors

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  • Eva A. Arnold

    () (Universität Hamburg (University of Hamburg))

  • Ingrid Größl

    () (Universität Hamburg (University of Hamburg))

  • Philipp Koziol

    () (European Central Bank)

Abstract

German savers are renowned for preferring safe, long-term investments, thus providing patient capital, with bank deposits playing an important role. Using a unique data set provided by the Deutsche Bundesbank for German banks, we examine whether German depositors are really that patient, abstaining from any type of market discipline, and how the financial crisis might have changed a well-established habit. Our empirical investigation reveals the existence of market discipline with a high degree of heterogeneity depending on banks’ governance structures. The announcement of a state guarantee for bank deposits following the collapse of Lehman Brothers succeeded in calming depositors of all banking groups but did not remove market discipline entirely. Remaining disciplinary reactions by depositors of different banking groups increase in homogeneity but some differences remain.

Suggested Citation

  • Eva A. Arnold & Ingrid Größl & Philipp Koziol, 2015. "Market Discipline Across Bank Governance Models. Empirical Evidence from German Depositors," Macroeconomics and Finance Series 201502, University of Hamburg, Department of Socioeconomics.
  • Handle: RePEc:hep:macppr:201502
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    Cited by:

    1. Matteo Accornero & Mirko Moscatelli, 2018. "Listening to the buzz: social media sentiment and retail depositors' trust," Temi di discussione (Economic working papers) 1165, Bank of Italy, Economic Research and International Relations Area.
    2. Kaposty, Florian & Pfingsten, Andreas & Domikowsky, Christian, 2017. "Market Discipline, Deposit Insurance, and Competitive Advantages: Evidence from the Financial Crisis," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168146, Verein für Socialpolitik / German Economic Association.
    3. repec:eee:quaeco:v:68:y:2018:i:c:p:237-253 is not listed on IDEAS
    4. Maria Semenova & Andrey Shapkin, 2016. "Currency Shifts as a Market Discipline Device: The Case of the Russian Market for Personal Deposits," HSE Working papers WP BRP 57/FE/2016, National Research University Higher School of Economics.

    More about this item

    Keywords

    Market discipline; bank depositor behavior; bank risk taking; deposit rates;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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