Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128005
Authors: 
Birchler, Urs
Maechler, Andréa M.
Year of Publication: 
2001
Series/Report no.: 
Working Paper, Study Center Gerzensee 01.06
Abstract: 
In this paper, we test for the presence of market discipline in the Swiss deposit market. In particular, we examine whether depositors monitor their banks and withdraw their savings deposits whenever the fundamentals of their bank are no longer satisfactory. We use a panel of bank-specific data on 250 Swiss banks over the period 1987-1998. We find considerable evidence of market discipline, in the sense that depositors are sensitive to bank-specific fundamentals, to institutional differences across bank groups, and to institutional changes in the Swiss depositor protection system. Our study complements the existing literature which predominantly builds on price indicators of market discipline (like yield spreads) by an approach based on quantities (the uninsured share of deposits). As few banks have traded debts outstanding, our approach is applicable to a much larger number of banks, including banks from non-industrialized countries.
Document Type: 
Working Paper

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