The Influencing Factors of Insured Banks' Moral Hazard in Deposit and Loan Business under the Condition of Deposit Insurance System

Abstract

Abstract:

Insured banks' moral hazard in deposit and loan business is an important factor that influences the efficiency of the deposit insurance system. This paper establishes a panel model with difference-in-differences estimation and a data set of macro economy and financial data of 524 banks in China and Indonesia from 1997 to 2013. With the help of one-sample test and Hausman test, the model which can represent the reality best is chosen. And the coefficient of major factors can tell the influence factors of insured banks' moral hazard in deposit and loan business. Our empirical research shows that the subordinated debt ratio, banks' franchise value, GDP per capita, the intermediary and ultimate goals of a country's monetary policy have a significant impact on banks' moral hazard in deposit and loan business under the condition of deposit insurance system, while deposit insurance system on the whole reduces banks' moral hazard in deposit and loan business. Bank size has uncertain influence on banks' moral hazard in deposit and loan business. The corresponding policy recommendations are given based on the unfavorable influencing factors of insured banks' moral hazard in deposit and loan business.

Key words: deposit insurance system, moral hazard, difference-in-differences estimation, deposit and loan business

Wang Xiaobo, Xin Feifei, Feng Jingbing. The Influencing Factors of Insured Banks' Moral Hazard in Deposit and Loan Business under the Condition of Deposit Insurance System[J]. , 2015, 27(7): 33-42.

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