households decisions on savings accounts. shpeka denis (1)

8/10/2019 Households Decisions on Savings Accounts. Shpeka Denis (1)

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HOUSEHOLDS ' DECISIONS ON SAVINGS

ACCOUNTS AFTER NEGATIVE EXPERIENCES WITH BANKS DURING THE FINANCIAL CRISISBY

CARIN A.B. VAN DER CRUIJEN, JAKOB DEHAAN, DAVID-JAN JANSEN, AND ROBERT H.J.

MOSCH

PLOTNIKOVA ALEXANDRA

ICEF, 3 RD YEAR, 6 TH GROUP

, , 2013www.hse.ru


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Background. Part 1Some strands of literature: how adverse shocks affect savings of

Dutch consumers.

The Reuters conclusion (2011) even less dramatic experiences of highinflation have effects for more than 10 years

Malmendier and Nagel conclusion (2011) individuals who experienced lowstock market returns are less willing to take risk and are less likely toparticipate in the stock market

Tate and Yan conclusion (2010) CEOs who grew up during the greatdepression are more likely to rely on internal finance rather than debt

Graham and Narasimhan conclusion (2004) firms with high leverage atthe end of the 1920s chose low levels of debt to equity in the 1940s

MEPSHAPMCs conclusion (2012) warnings by the Food and Drug Administration (FDA) about increased risks of suicide related toantidepresants coincide with reduced initiation of use among children


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Background. Part 2

Analysis is based on data from De Nederlansche Bank Household Survey

(DHS ), a continuous Internet-based survey among Dutch households.The panel consists of almost 2500 members who answer questionnaires viahome computers.

Concerning the survey:# of asked people 2475, 85% response rate.


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First evidence of Crisis Effects

The figure shows the average holding of several financial instruments b/w 2003 and 2010:

Average number of savings accounts increased from 1.6 to 1.8. Average number of stocks accounts decreased. Average number of checking accounts remains rather stable.


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The Survey: Variables for Crisis During the past 3 years, did a bank at which you were a

customer go bankrupt? During the past 3 years, did a bank at which you were a

customer service with the help of government support?

xperience

Questions asked:

Dummy variables constucted:

1 for bankruptcy 0 - otherwise

1 for bailout* 0 - otherwise

1 for bankruptcyand bailout

0 - otherwise

Bailout* - is a colloquial term for giving financial support to a company orcountry which faces serious financial difficulty or bankruptcy.

Variables for Crisis Exp erience


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The Survey: Variables for Crisis Currently, do you have a savings account at a bank? Which part of your savings is fixed for a set

duration? Have you transferred savings to another bank during

the past 3 years?

xperience

Questions asked:

Dummy variables constucted:

1 customers spreadaccounts across banks 0 - otherwise

1 respondents who have timedeposits

0 - otherwise

Special variable whichmeasures the degree to which time depositsused*

The variable is ranged from 1 to 4: 1 = no time deposits, 2 = part of savings, but less than half, 3 = atleast half of savings, 4 = all savings are time deposits.

1 =

Dependent var iables

1 for respondents who shiftedsavings between banks

0 - otherwise

Special variable which measures thedegree of fund shifting across banks**


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Column 1 outcomes, if allrespondents are included in aregression without controlvariables.

Column 2 full set of controlvariablesColumn 3 presents resultsif individuals who had savingsat a bank which wentbankrupt are excluded.

* In statistics , a probit model is a type of regression where the dependent variable canonly take two values, for example married or not married.

The table providesmarginal effects for probitmodels* in which thedependent variable is adummy (1 respondents

who have savingsaccounts at more than onebank)
http://en.wikipedia.org/wiki/Statisticshttp://en.wikipedia.org/wiki/Regression_analysishttp://en.wikipedia.org/wiki/Dependent_variablehttp://en.wikipedia.org/wiki/Dependent_variablehttp://en.wikipedia.org/wiki/Regression_analysishttp://en.wikipedia.org/wiki/Statistics


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Results of a first regression :

1) If a respondents bank went bankrupt during the preceding 3

years, the likelihood that she has savings accounts at severalbanks in 2010 is 21 % higher than for respondents withoutnegative

2) For individuals whose bank was bailed out, this probability is 19 %p.p. higher.

3) When including the full set of control variables, these percentages

are reduced to 14% and 15% respectively, but remain highlysignificant.4) The estimates in column (2) indicate an increase of 39% in the

likelihood of having accounts at multiple banks, compared torespondents without negative crisis experiences with the bankingsector.

5) The relationship with gender is negative (male respondents areless likely to have accounts at more than one bank). Explanation:women tend to be more risk-averse .*

* Risk-averse a person who prefers certain prospect touncertainty under the same expected value of consumption .


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Column 1-3 the dependentvariable is a dummy measuringwhether or not respondents havetime deposits.Column 4-6 the dependentvariable measures the degree towhich time deposits are usedon a scale feom 1 (no timedeposits) to 4 (all savings intime deposits)

The table shows the results forthe analysis of time deposits.


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Results of a second regression

1) The coefficients for having experienced a bank bailout or abankruptcy are not statistically significant.2) Only for the group of respondents who experienced both types ofadverse experiences are the parameter estimates clearly significantlydifferent from zero. (Again indicates that the size of the negative shockis relevant!)

3) Homeowners use time deposits more than people who do not possesa house (a total wealth effect takes place)4) Highly educated respondents are less likely to use time depositsintensively5) Strong socio-economic status and age come out significantly and witha positive sign.


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The last table provides theinformation about how

consumers have movedfunds across banks after the

banking crisis. Dummy whether respondents have

shiftes a part of theirsavings to another bank.

Columns (1)-(3) thedependent variable is adummy measuring whetherrespondents have shifted apart of their savings to anotherbank.Columns (4)-(6) thedependent variable is thedegree to which respondentsshifted savings across banks.


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Results of a third regression.

1) If a respondents bank went bankrupt during the preceding threeyears, the likelihood of shifting savings to another bankincreases by 41 % compared to consumers with no adverseexperience.

2) Homeowners are more likely to have transferred savings toanother bank than people who do not possess a house.

3) Highly educated respondent are more likely to have shiftedsavings and the degree to which they do so is also higher.

4) The same holds for respondents with a high income and a highsocial status.


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The main conclusions of the article.

o

The authors documented how since


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Comments on study Advantages:1) A lot of objectives were stated all of them were studied.2) The results can be possibly applied for other stable financial systems like the

UKs one.

3) The same system can be used to study effects on another financialinstruments like mortgages or credit cards.4) Reliable data is used.

Disadvantages:1) The Netherlands was characterized by relative stability (between 1945 and

2007 only four bank failures occurred and three of them took place before1983). It follows it could be difficult to extrapolate results on other, less stablecountries.

2) There is no option like I do not know in the survey. Another minus of surveyis that it is commonly based on self- reporting. It could result in noisyestimates.

3) There is objectively some correlation between, for example, gender andincome or status and education, which can provoke multicollinearity.


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households decisions on savings accounts. shpeka denis (1)

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