The Impact of Bank's Ownership Change on Market Discipline: the Case of Bank Deposits Russian Market

Student: Prudnikov Dmitrij

Educational Programme: Bachelor

Year of Graduation: 2014

This paper analyzes the effect of a change in bank’s ownership on depositors' market discipline. On the basis of banks’ mergers and acquisitions data, the paper examines how investors react to bank’s signals related to its reliability. The study explores both price and quantity mechanisms which control depositors’ market discipline. The Russian banking sector experiences financial instability currently, hence, this topic is of great importance given that it studies the specifics of market discipline variations caused by a change in ownership. Many researchers confirmed that the majority of institutional changes, including a change in bank’s ownership, entails corresponding variations in the sensitivity of depositors’ market discipline.Depositors consider the change in bank’s ownership as a negative signal to the bank’s financial stability and reliability. The regression findings confirm that the depositors’ reaction to a new ownership is negative. To get more clarity and conduct deeper analysis, merger and acquisition transactions were subdivided into three types: state-owned bank, foreign bank and Russian commercial bank. The regression results show that investors do not react to acquisition of the bank by its foreign competitor or state-owned bank. At the same time, an interesting finding is that the acquisition of a bank by its commercial competitor leads to negative sensitivity by depositors to these changes.The results indicate that depositors do react to a change in bank’s ownership assuming that the new owner is commercial bank. This finding is explained by behavioral aspects of depositors, who become more prudent and more sensitive to risks. However, depositors do not react to a change in bank’s ownership if the latter was acquired by its state-owned bank or foreign competitor. The analysis shows that depositors exhibit negative sensitivity to a change in bank’s ownerships.

Student Theses at HSE must be completed in accordance with the University Rules and regulations specified by each educational programme.

Summaries of all theses must be published and made freely available on the HSE website.

The full text of a thesis can be published in open access on the HSE website only if the authoring student (copyright holder) agrees, or, if the thesis was written by a team of students, if all the co-authors (copyright holders) agree. After a thesis is published on the HSE website, it obtains the status of an online publication.

Student theses are objects of copyright and their use is subject to limitations in accordance with the Russian Federation’s law on intellectual property.

In the event that a thesis is quoted or otherwise used, reference to the author’s name and the source of quotation is required.

Search all student theses