The effect of endowment level and deposit insurance level to depositors' withdrawal behavior: An experimental approach

Date of Publication

2008

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Commerce Major in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Andrew Adrian Yu Pua

Defense Panel Chair

Gerardo L. Largoza

Defense Panel Member

Jeffry Tejada
R. Carlo Asuncion

Abstract/Summary

Deposit insurance plays a huge role in the financial system. It provides depositors' confidence that their hard earned money is placed in good hands and that regardless of risk, they will be able to get their money back. Knowing that most people have weak risk appetite, the existence of deposit insurance allows depositors to have a feeling of security while facing risk.

This study aims to determine if the level of deposit insurance (0%, 50% and 100%) and endowment (high and low) level has an effect on a depositor's withdrawal behavior. To achieve the objective of this study, 180 randomly selected students from the Economics and/or Finance Department were invited to participate in a computer-based experiment. This experiment was composed of six treatments wherein each treatment was made up of three rounds and each round is composed of four periods. The six treatments in this study differ from the amount of insurance coverage and level of endowment.

The study found out that a change from low to high endowment had an effect on depositor's withdrawal behavior a factor which has been disregarded by previous studies. Given a full insurance coverage, it was observed that participants withdrew their money at the later periods. At the same time, they were more consistent with their withdrawal decisions. Furthermore, the quality of banks does not necessarily reduce the incidence of bank failure.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU21820

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

127 leaves

Keywords

Deposit insurance; Bank deposits; Financial institutions--Management

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