Response of uninsured depositors to impending S&L failures: Evidence of depositor discipline

This paper examines the behavior of uninsured deposits at savings and loan associations from 1986 to 1989 to discover whether depositors adjust their holdings of uninsured deposits in response to indications of impending institutional failure. The study finds that failing S&Ls exhibit declining levels of uninsured deposits and attract fewer uninsured deposits prior to failure than do non-failing S&Ls. Measures of financial strength and aggressiveness generally affect the level of uninsured deposits in the expected directions.