%0 Journal Article
%T Does a Deposit Insurance Scheme Induce Moral Hazard among Bankers? Evidence from an experiment with bankers
%A Bernardinus Maria Purwanto
%A Gumilang Aryo Sahadewo
%A Rimawan Pradiptyo
%J -
%D 2018
%R https://doi.org/10.22146/gamaijb.38873 https://doi.org/10.22146/gamaijb.38873
%X The implementation of a deposit insurance scheme entails a trade off. On one hand, as shown in theoretical and empirical studies, a deposit insurance scheme reduces the likelihood of a bank run. On the other hand, a deposit insurance scheme induces moral hazard among bankers that may lead to bank failures. We rigorously test the effect of different deposit coverage limit and the implementation of a differential premium treatment on bankers¡¯ behaviors in the deposit and credit market. We do so by designing a laboratory experiment that involves real bankers as participants. We find that the coverage limit treatments do not have any effect on deposit rate offer. Nevertheless, we find that a high deposit coverage limit induces smaller banks to have a higher share of risky projects. This is evidence of moral hazard particularly among small banks
%U https://jurnal.ugm.ac.id/gamaijb/article/view/38873