Mind the Gap : Gender Disparity in Depositor Responses to Bank Regulatory Actions

We utilize branch-level data on deposits of commercial banks in India to study heterogeneity in depositors' responses to the disclosure of significant regulatory penalties. We find that men respond to such monetary penalties by withdrawing their deposits, whereas women do not. However, relative to other women, those in matrilineal societies, who are more empowered and are responsible for managing household finances, do withdraw their deposits from troubled banks. Our findings suggest that control over household finances is a crucial factor that drives depositors' responses to regulatory penalties. We conduct additional analyses to understand the broader implications of disclosing regulatory penalties and depositors withdrawing funds. Our findings suggest that news of penalties on some banks leads depositors to lose trust in the banking system overall and withdraw funds from offending and neighboring banks. Our study contributes to the literature on depositor heterogeneity and could inform regulators' decisions to disclose the outcome of their supervisory efforts