Depositor Discipline in Russian Regions: Flight to Familiarity or Trust in Local Authorities?

40 Pages Posted: 20 Oct 2016 Last revised: 25 Oct 2016

See all articles by Koen J. L. Schoors

Koen J. L. Schoors

Ghent University - Centre for Russian International Socio-Political and Economic Studies (CERISE); Ghent University - Department of General Economics

Maria Semenova

National Research University Higher School of Economics

Andrey Zubanov

University of Wisconsin-Madison - Department of Economics

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Date Written: October 20, 2016

Abstract

We analyse whether depositor familiarity with a bank affects depositor behaviour during a financial crisis. We measure familiarity by looking for regional or local cues in the bank’s name. We measure depositor behaviour by the their sensitivity to observable bank risk (market discipline). Using 2001-2010 bank-level and region-level data for Russia, we find that depositors of familiar banks become less sensitive to bank risk after a financial crisis relative to depositors of unfamiliar banks. To check that the results are not driven by any implicit support of banks with regional cues in their names by regional governments, but indeed by familiarity bias, we interact the variables of interest with measures of trust in local governments and regional affinity. We find that the flight to familiarity effect is strongly present in regions with strong regional affinity, while the effect is rejected in regions with more trust in regional and local governments. This indicates our results are driven by familiarity and not by any implicit protection from a trusted regional or local government

Keywords: Market discipline, Bank, Personal deposit, Region, Russia, Flight to familiarity, Trust, Implicit guaranty, Regional authorities

JEL Classification: G21, G01, P2

Suggested Citation

Schoors, Koen J. L. and Semenova, Maria and Zubanov, Andrey, Depositor Discipline in Russian Regions: Flight to Familiarity or Trust in Local Authorities? (October 20, 2016). Higher School of Economics Research Paper No. WP BRP 58/FE/2016, Available at SSRN: https://ssrn.com/abstract=2856253 or http://dx.doi.org/10.2139/ssrn.2856253

Koen J. L. Schoors

Ghent University - Centre for Russian International Socio-Political and Economic Studies (CERISE) ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 265 35 99 (Fax)

Ghent University - Department of General Economics ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 264 35 99 (Fax)

Maria Semenova (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Andrey Zubanov

University of Wisconsin-Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States

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