Abstract
AbstractIn this paper, we analyze whether credit unions are subject to market discipline by their (member) depositors and examine the drivers of such discipline. We first provide descriptive evidence of depositor discipline in credit unions: shares and deposits as well as savings interest rates react to variables that reflect the financial health of the credit union and its asset risk. We show that this discipline is long‐lasting and that it is mediated by the existence of a deposit guarantee scheme and by the strength of the relationship of members with the credit union. We then use proxies of the capability of members to process financial information to show that discipline is heavily influenced by member financial sophistication. Our results suggest that a type of market‐based discipline acts as a complement for regulation in controlling credit union risk taking, thus contributing to overall financial stability.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
