Dynamic Depositor Discipline in U.S. Banks

By Kathleen Mcdill, Andréa M. Maechler. Social Science Research Network, 2003

150 citations recorded by the source corpus.

This paper investigates the presence of depositor discipline in the U.S. banking sector. We test whether depositors penalize (discipline) banks for poor performance by withdrawing their uninsured deposits. While focusing on the movements in uninsured deposits, we also account for the possibility that banks may be forced to pay a risk premium in the form of higher interest rates to induce depositors not to withdraw their uninsured deposits. Our results support the existence of depositor discipline: a weak bank may not necessarily be able to stop a deposit drain by raising its uninsured deposit interest rates.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/49bd738096696f0b49c1aed325786703fdf5c9a1

Citations in the corpus

• Liquidity Risk Management and Credit Supply in the Financial Crisis (2011, unknown): “For example, Hannan and Hanweck (1988) find uninsured depositors require higher interest rates at riskier banks and Maechler and McDill (2006) suggest uninsured depositors may not supply liquidity to weak banks at any price.”