Depositors Disciplining Banks: The Impact of Scandals
50 Pages Posted: 11 Dec 2018
Date Written: November 27, 2018
Do depositors react to negative non-financial information about their banks? By using branch level data for the United States, I show that banks, that financed the highly controversial Dakota Access Pipeline, experienced significant decreases in deposit growth, especially in branches located closest to the pipeline. These effects were greater for branches located in environmentally or socially conscious counties, and data suggests that savings banks were among the main beneficiaries of this depositor movement. Using a global hand-collected dataset on tax evasion, corruption, and environmental scandals related to banks, I show that negative deposit growth as a reaction to scandals is a widespread phenomenon.
Keywords: Depositor Discipline, Bank Scandals, Environment, Tax Evasion, Corruption
JEL Classification: G21, G41, M14
Suggested Citation: Suggested Citation