Deposit Insurance System, Government Credit in Law and the Depositors’ Market Confidence

Using the multinational samples of 130 countries (or regions) in the world, this paper regards the deposit insurance system as a quasi-natural experiment, studies how the deposit insurance system affects the market confidence of the public depositors through PSM model and two-way FE model, then draws the following conclusions. Firstly, the establishment of the deposit insurance system has a significant positive disposal effect on the market confidence of the public depositors, and the further sub sample test results show that the disposal effect is different, compared with developing economies, the positive effect of deposit insurance system on depositors' market confidence is more significant in developed economies. Secondly, there is a significant correlation between the rule of law credit of a government and the disposal effect of deposit insurance system on the market confidence of depositors, In other words, the higher the government's legal credit status, the more social credibility the deposit insurance system established in the form of law provides for the market expectations of the public depositors, which can give full play to the function of the system, and then maintain the depositors' market confidence in the banking system.