Banking crises and market discipline: International evidence

Cubillas, Elena; Fonseca, Ana Rosa; González, Francisco

doi:10.1016/j.jbankfin.2012.04.011

Cited by 99 publications

(67 citation statements)

References 48 publications

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“…Looking at the previous research conducted by Cubillas, et al (2012) and Haddad, et al (2011), this study has not yet found a research about the effects of the banking crisis on the market discipline level for the two crisis periods. This study was interested in performing this research, because it connected to the Indonesian situation, between the first crisis and the second crisis.…”

Section: Theory Frameworkmentioning

confidence: 63%

“…They found that the adoption of the "blanket guarantee" scheme weakened the market discipline level. Other research regarding the effect of the banking crisis on the market discipline was conducted by Cubillas, et al (2012), they analyzed the effect of the banking crisis on the market discipline by using an international sample of the banks. That study showed that on the average the market discipline weakened after the banking crisis.…”

Section: Theory Frameworkmentioning

confidence: 99%

“…The market discipline can be defined as a situation where the depositors punish the bank by requesting a higher interest rate or they will withdraw their money from that bank (Cubillas , et al, 2012). Actually, when a country has a good market discipline level, the banks tend to show banker behaviors and minimize speculative acts by the speculators.…”

Section: Introductionmentioning

confidence: 99%

“…They found the adoption of the "blanket guarantee" scheme which weakened the market condition. Other investigations regarding the banking crisis impact were conducted by Cubillas et al (2012). They analyzed the effects of the banking crisis on the market discipline situation by using an international sample of these banks.…”

Section: Introductionmentioning

confidence: 99%

“…The market discipline, in general, were agreed upon by the regulators and academicians to limit the bank risks that always varies and prevent a banking crisis (Cubillas, et al, 2012). The research conducted by the study was focused on the variation of the market discipline level in Indonesia at the time a banking crisis having a systemic effect in 1997-1998 happened and a crisis without systemic effects in 2008 (Laeven and Valencia 2012).…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Banking Crises and Market Discipline in Indonesian Banking Industry

Sikatan¹,

Rokhim²

2017

jak

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This study analyzes the effect of banking crises towards market discipline in Indonesia. This study uses two periods of crisis in Indonesia, which are banking crisis in 1997/1998 and banking crisis in 2008. The dependent variable is market discipline; while bank risks are the independet variables (insolvency, liquidity, and credit risks). The control variables are banking level (the percentage savings of the customer, bank's size, bank's overhead costs, and Lerner index); industrial level (banking concentration level, the bank development); and macroeconomic variables (the growth of the real gross domestic product and inflation rate). The variables examined by the Generalized Method of Moments (GMM). This study finds a fact that on average market discipline weakens after Indonesia's banking crisis in 1997/1998. On the contrary, this study found a fact that market discipline strengthens after Indonesia's banking crisis in 2008. Eventually, this study finds a fact that there is no difference in market discipline between the domestic bank and foreign bank after Indonesia's banking crisis in 2008.Keywords: Banking crises; market discipline; bank risk taking; Indonesia. ABSTRAK Penelitian ini menguji dampak krisis perbankan terhadap market discipline di Indonesia, Penelitian ini menggunakan dua periode krisis perbankan di Indonesia yaitu tahun 1997/1998 dan tahun 2008. Variabel dependen adalah market discipline, sedangkan risiko perbankan merupakan variabel independen yang meliputi insolvency, likuiditas dan risiko kredit. Variabel kontrol terdiri dari level perbankan (tingkat tabungan pelanggan, ukuran bank dan beban overhead bank, Lerner index), level industry (level konsentrasi bank dan bank development), dan variabel-variabel ekonomi makro yang terdiri dari tingkat pertumbuhan produk domestic bruto riil dan tingkat inflasi. Variabel penelitian diuji menggunakan Generalized Method of Moments (GMM

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Section: Theory Frameworkmentioning

confidence: 63%

Section: Theory Frameworkmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Banking Crises and Market Discipline in Indonesian Banking Industry

Sikatan¹,

Rokhim²

2017

jak

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Market discipline and the risk‐taking behaviour of banks in India

2023

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After the financial crisis, the Indian banking system has accumulated a mountain of bad loans which has crippled the banking sector and halted the credit flow to the industry. Several immediate causes for the bad loan crisis have been pointed out. However, poor market discipline, the ultimate root cause of the bad loan crisis, has not been paid adequate attention. This study seeks to investigate how effectively the market disciplinary forces, captured through information disclosure, interbank deposits, concentration and ownership structure, incentivise the Indian banks to adopt prudential risk management by enhancing their risk‐weighted capital ratio. The findings of the study show that information disclosure and interbank deposits do not induce prudential risk behaviour among banks in India. However, with increasing concentration in the banking sector, a higher level of information disclosure effectively induces banks to maintain higher capital ratios, but inter‐bank deposits do not have any significant effect on bank capital. We also observe that government banks maintain lower capital ratios as compared to private banks indicating government banks' higher expectation of government bailout.

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Government support of banks and market discipline: International evidence

Lin

2021

Rev Financ Econ

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This study analyzes the effect of government support on market discipline in an international sample of banks rated by Moody's or Fitch. We also evaluate how a financial crisis and size shape the effect of government support on market discipline. We control for unobservable, country, and time‐specific effects with a panel dataset of banks from 77 countries. Through this comprehensive dataset, we find that government support significantly reduces the market discipline of banks, and this effect is most reflected by an expected increase in charter value. However, market discipline is more pronounced after the 2008 financial crisis and for smaller than bigger banks. These results have important implications for banking regulation and supervision, particularly during a crisis period.

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Banking crises and market discipline: International evidence

Cited by 99 publications

References 48 publications

Banking Crises and Market Discipline in Indonesian Banking Industry

Banking Crises and Market Discipline in Indonesian Banking Industry

Market discipline and the risk‐taking behaviour of banks in India

Government support of banks and market discipline: International evidence

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