Deposit Insurance and Depositor Discipline: Direct Evidence on Bank Switching Behavior in Japan
As Japan's financial system moves toward a more market oriented one, depositor discipline is expected to play a larger role in the monitoring of the country's banks. Relying on detailed survey data on households' bank switching behavior matched with banks' financial data, we examine households' response to bank risk and different deposit insurance schemes. We find that bank switching in response to risk was more frequent in 2001 than in 1996 and that households' choice of bank provides an adequate reflection of banks' financial health. We also examine the determinants of households' knowledge of the deposit insurance scheme and find that income, the amount of households' financial assets, and educational attainment are all significant factors. What is more, households' extent of knowledge regarding the deposit insurance scheme was an important determinant of bank switching behavior. The results suggest that depositor discipline appears to work and could play an important supplementary role in monitoring the banking sector.
|Date of creation:||Oct 2005|
|Date of revision:|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi City, Tokyo 186|
Web page: http://www.ier.hit-u.ac.jp/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- HORI Masahiro & ITO Yasuaki & MURATA Keiko, 2005. "Do Depositors Respond to Bank Risks as Expected? Evidence from Japanese Financial Institutions in the Banking Crisis," ESRI Discussion paper series 151, Economic and Social Research Institute (ESRI).
- MURATA Keiko & HORI Masahiro, 2004. "End Of The Convoy System And The Surge Of Market Discipline: Evidence From Japanese Small Financial Institutions," ESRI Discussion paper series 105, Economic and Social Research Institute (ESRI).
- Noriko Inekura & Satoshi Shimizutani, 2005. "Yokin Hoken Seido, Pay-off Kaikin to Yokishakiritsu: Kakei no Microdata ni yoru azukekaekoudou no kensho (in Japanese)," Hi-Stat Discussion Paper Series d05-83, Institute of Economic Research, Hitotsubashi University.
- Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 273-305, August.
- Demirguc-Kunt, Asl' & Kane, Edward J., 2001.
"Depositinsurance around the globe : where does it work?,"
Policy Research Working Paper Series
2679, The World Bank.
- Asli Demirguc-Kunt & Edward J. Kane, 2002. "Deposit Insurance Around the Globe: Where Does It Work?," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 175-195, Spring.
- Edward J. Kane & Asli Demirguc-Kunt, 2001. "Deposit Insurance Around the Globe: Where Does it Work?," NBER Working Papers 8493, National Bureau of Economic Research, Inc.
- Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 375-399, March.
When requesting a correction, please mention this item's handle: RePEc:hst:hstdps:d05-125. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tatsuji Makino)
If references are entirely missing, you can add them using this form.