Does bank credit risk impact deposit allocation in commercial banks?

: the case of US commercial banks

Abstract

In the last years, with the occurrence of many financial banking crises worldwide, bank credit risk has been a focus of the market. This thesis aims to analyse whether depositants do care about bank credit risk when they allocate their deposits in commercial banks or not. The literature rarely focuses on this crucial relationship between bank credit risk and deposit demand. In order to further develop this topic, a demand model was defined and estimated applying the characteristic methodology and using multinomial logit and nested multinomial logit specifications. Many banks observed characteristics were included, such as deposit interest rate, service fees, number of branches, number of employees, bank size and bank credit risk. Using a sample of US commercial banks between 2009 and 2015, findings suggest that depositors react to deposit interest rates and bank size in a positive and statistically significant way when choosing a bank. In addition to that, consumers do care about banks geographic diversification, but they do not consider bank credit risk in a statistically significant way, when deciding their deposits allocation.

Date of Award	4 Dec 2017
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Ribeiro (Supervisor)