Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance

Martin, Christopher; Puri, Manju; Ufier, Alexander

doi:10.2139/ssrn.3172256

Cited by 8 publications

(23 citation statements)

References 22 publications

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“…For instance, there is evidence that the market adjusts accounting numbers when calculating leverage ratios (e.g., Blankespoor et al, 2013) and the market pricing of Level 3 fair values is not consistent with the view that investors naively interpret the numbers (e.g., Song et al, 2010). Fourth, and perhaps most importantly, government guarantees and implicit bailout expectations impede market discipline (e.g., Martinez-Peria and Schmukler, 2001;Demirgüc-Kunt and Huizinga, 2004;Martin et al, 2018). For disclosure to facilitate market discipline, investors need incentives to act upon the information.…”

Section: Disclosure and Market Disciplinementioning

confidence: 99%

Accounting for Financial Stability: Lessons from the Financial Crisis and Future Challenges

2019

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This paper investigates what we can learn from the financial crisis about the link between accounting and financial stability. The picture that emerges ten years after the crisis is substantially different from the picture that dominated the accounting debate during and shortly after the crisis. Widespread claims about the role of fair-value (or mark-to-market) accounting in the crisis have been debunked. However, we identify several other core issues for the link between accounting and financial stability. Our analysis suggests that, going into the financial crisis, banks' disclosures about relevant risk exposures were relatively sparse. Such disclosures came later after major concerns about banks' exposures had arisen in markets. Similarly, banks delayed the recognition of loan losses. Banks' incentives seem to drive this evidence, suggesting that reporting discretion and enforcement deserve careful consideration. In addition, bank regulation through its interlinkage with financial accounting may have dampened banks' incentives for corrective actions. Our analysis illustrates that a number of serious challenges remain if accounting and financial reporting are to contribute to financial stability.

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Section: Disclosure and Market Disciplinementioning

confidence: 99%

Accounting for Financial Stability: Lessons from the Financial Crisis and Future Challenges

2019

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“…In this context, our paper relates to studies analyzing deposit withdrawals during stress periods due to either panic or deterioration of bank fundamentals. Recent contributions include Puri (2012), Iyer, Puri, andRyan (2016), Martin, Puri, andUfier (2018), andArtavanis et al (2019).…”

Section: Introductionmentioning

confidence: 99%

Banks as patient lenders: Evidence from a tax reform

Carletti

Marco

Ioannidou

et al. 2021

Journal of Financial Economics

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“…A logical conclusion from our evidence is that the potential for a deposit insurance scheme that targets regular depositors to undermine the disciplining effect of short-term debt is limited. Evidence from settings with deposit insurance suggests that insured depositors are less likely to run than uninsured depositors (Iyer and Puri, 2012;Iyer et al, 2016;Martin et al, 2018). We find that retail and non-financial wholesale depositors-even if uninsured-may not run at all, and to the extent that they do run, they don't discriminate between banks by their likelihood of failure.…”

Section: Introductionmentioning

confidence: 61%

“…Studying bank runs empirically is typically constrained as deposit insurance schemes distort depositors withdrawal decisions and make runs infrequent in modern banking crises (Baron et al, 2020). Thus, while empirical studies of bank runs have made great progress in understanding depositor behavior (Iyer and Puri, 2012;Iyer et al, 2016;Martin et al, 2018;Iyer et al, 2019), the literature lacks evidence on how different types of depositors would react to a major financial shock when there is no deposit insurance.…”

Section: Introductionmentioning

confidence: 99%