Market price accounting and depositor discipline: The case of Japanese regional banks |
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Authors: | Mark M Spiegel Nobuyoshi Yamori |
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Institution: | 1. Federal Reserve Bank of San Francisco, 101 Market Street, San Francisco, CA 94105, United States;2. Department of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya-city, 4648601, Japan |
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Abstract: | We examine the determinants of Japanese regional bank pricing-to-market decisions and their impact on the intensity of depositor discipline, in the form of the sensitivity of deposit growth to bank financial conditions. To obtain consistent estimates, we first model and estimate the bank pricing-to-market decision and then estimate the intensity of depositor discipline after conditioning for that decision. We find that banks were less likely to adopt market price accounting the larger were their unrealized securities losses. We also find statistically significant evidence of depositor discipline among banks that elected to price to market. Our results indicate that depositor discipline was more intense for the subset of banks that adopted market price accounting. |
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Keywords: | G18 G21 |
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