Banking on Trust: Supervisory Transparency and Depositors’ Actions

60 Pages Posted: 7 Jun 2024

See all articles by Abhiman Das

Abhiman Das

Indian Institute of Management Ahmedabad

Tanmoy Majilla

Erasmus University Rotterdam (EUR)

Rimmy E. Tomy

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: June 5, 2024

Abstract

We explore the role of institutional trust in influencing depositors’ reactions to bank super-visory actions in India. Utilizing a unique event that led to unexpected penalties on banks and the quasi-random nature of branch locations, we find news of penalties on some banks leading to deposit withdrawals from offending and neighboring nonoffending branches. Such withdrawals are more pronounced in regions with lower trust in public institutions, including trust in courts and banks. Trust is associated with information access and the quality of local services. We find limited evidence that credit and economic activity also decline in regions with deposit withdrawals.

Keywords: Banking, Bank runs, Banking supervision, Deposits, Depository institutions, Disclosure regulation, Market discipline, Regulatory penalties, Trust, Developing markets

JEL Classification: 44, E58, G21, G28, G38, K23, L51, M41, M48, N20, O16

Suggested Citation

Das, Abhiman and Majilla, Tanmoy and Tomy, Rimmy, Banking on Trust: Supervisory Transparency and Depositors’ Actions (June 5, 2024). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2024-68, Available at SSRN: https://ssrn.com/abstract=4855411 or http://dx.doi.org/10.2139/ssrn.4855411

Abhiman Das

Indian Institute of Management Ahmedabad ( email )

Vastraour
Ahmedabad, 380015
India

Tanmoy Majilla

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Rimmy Tomy (Contact Author)

University of Chicago ( email )

Booth School of Business
5807 S Woodlawn Ave
Chicago, IL 60637
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
8
Abstract Views
75
PlumX Metrics