Foreign bond investors and market discipline

Rommerskirchen, Charlotte

doi:10.1177/1024529419872171

Cited by 10 publications

(10 citation statements)

References 88 publications

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“…The yield spread is assumed to be a debt holder's reaction to the risk taken by banks. The relationship between the spread of yield and bank risks can indicate the existence of market discipline from debt holders' perspective, based on the evidence in foreign bond investors (Rommerskirchen, 2020), bondholders (Morrison and Walther, 2020), equity holders (Morrison and Walther, 2020) and depositors (Hou et al, 2016). In the context of Islamic banking, Aysan et al (2017) stated that the profit and loss sharing framework may contribute to market discipline.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Therefore, the market discipline in the context of withdrawal behavior in this study was examined using a behavioral financial approach. The other previous studies used some indicators reflecting the bank's risk, which were indicated in the financial statement and then related the risk to stock return (Morrison and Walther, 2020), bond spread (Morrison and Walther, 2020;Rommerskirchen, 2020) and deposit growth (Calomiris and Jaremski, 2019;Hou et al, 2016;Ioannidou and De Dreu, 2019). However, traditional finance theory cannot capture how financial decisions are made.…”

Section: Introductionmentioning

confidence: 99%

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Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Widyastuti

Febrian

Sutisna

et al. 2021

JIABR

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Purpose This study aims to determine antecedents of market discipline. A model was constructed by extending the theory of planned behavior (TPB) to explore the cognitive, psychological and social factors that influence the market discipline in the form of withdrawal behavior. Design/methodology/approach This study applied a quantitative approach by surveying 181 Indonesian retail investors in Sharia mutual funds, which were represented by civil servants. The samples were collected using the purposive sampling technique. This study used the partial least square–structural equation model to analyze the data. Findings The results revealed that the Islamic financial literacy, the attitudes toward withdrawal, the subjective norms and the perceived behavioral control had a positive significant effect on the withdrawal intention, whereas financial risk tolerance had an insignificant impact. Then, all the exogenous variables and intention to withdraw had a significant contribution in explaining market discipline. Contrary to the proposed hypothesis, the attitude toward withdrawal had a negative impact on market discipline. The structural model indicated that the TPB could be extended by adding some exogenous variables (i.e. Islamic financial literacy and financial risk tolerance) in determining the intention to withdraw and withdrawal behavior, which indicated the market discipline in Sharia mutual funds. Research limitations/implications This study was limited to individual investors who work as civil servants. This study did not accommodate different demographic factors such as age and gender, which influence fund withdrawal behavior. Practical implications The government must focus on the inclusion of market discipline in Sharia mutual funds’ regulation to encourage the risk management disclosure, specifically that related to Sharia compliance. Originality/value Previous studies applied a traditional finance theory to predict market discipline, but this study contributes to filling the theoretical gap by explaining the market discipline from a behavioral finance perspective that was found in Sharia mutual funds.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Widyastuti

Febrian

Sutisna

et al. 2021

JIABR

View full text Add to dashboard Cite

show abstract

“…115. Ballard-Rosa 2016, 2020 partisanship are not systematically associated with the currency composition of government bonds, this measurement error will primarily serve to attenuate any true effect. Indeed, it is difficult to come up with a reason that such partisan codings would be likely to lead to directional bias in our primary estimates regarding proportions of domestic-currency denomination.…”

Section: Subset On Regime Typementioning

confidence: 99%

“…Chwieroth 2009Datz 2008. On the implications of variation in the investor base for fiscal consolidation, see Rommerskirchen 2020. 14.…”

Section: Trends In Developing-country Sovereign Debtmentioning

confidence: 99%

Coming to Terms: The Politics of Sovereign Bond Denomination

Ballard-Rosa¹,

Mosley²,

Wellhausen³

2021

Int Org

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Governments interact strategically with sovereign bond market creditors: they make choices not only about how often and how much to borrow, but also under what terms. The denomination of debt, in domestic or foreign currency, is a critical part of these terms. The “original sin” logic has long predicted that creditors have little appetite for developing-country government debt issued in domestic currency. Our novel data, including bond issues by 131 countries in 240,000 primary market transactions between 1990 and 2016, suggest otherwise. Domestic-denominated bonds have come to dominate the market, although domestic-currency issuance often is accompanied by shorter bond maturities. We argue that ideologically rooted policy preferences play an important role in this unexpected trend in denomination. All else equal, right governments choose foreign denomination as a means of mitigating currency risk and thus minimizing borrowing costs. In contrast, left governments opt for the flexibility of domestic denomination, and they are better able to act on their preferences in the presence of risk-mitigating monetary institutions and macroeconomic stability. We find support for our argument that partisanship has a robust and enduring relationship with denomination outcomes, even in a marketplace in which domestic-denominated developing-country sovereign bonds have become the norm.

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“…From being virtually isolated 20 years ago, portfolio investment that flowed into China increased unprecedentedly post-GFC (Figure 1). In neoliberal capital markets which are based on the principle of free capital movements, international investors’ ability to withdraw funds serves as disciplinary mechanism (Bortz and Kaltenbrunner, 2018; Rommerskirchen, 2020). The GFO is self-reinforcing.…”

Section: Integrating Into Global Finance: Resisting Neoliberal Capital Marketsmentioning

confidence: 99%

Same same, but different: Varieties of capital markets, Chinese state capitalism and the global financial order

Petry

2020

Competition & Change

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Since 2009, China’s capital markets have developed and internationalized to an unprecedented degree, which has contributed to a lot of debates on China’s rise and its implications for the global financial order. Contributing to these debates, this article analyses the development of capital markets in China and their integration into global finance between 2009 and 2019, focusing on three aspects: how Chinese capital markets are developing domestically; how they are integrating with global markets; and how Chinese capital markets are internationalizing, i.e. expanding abroad. Thereby, the article analyses the crucial role of securities exchanges who as organizers of capital markets are powerful actors that exercise considerable influence over these markets and their development. This empirical investigation reveals that while they share some characteristics with ‘global’ capital markets, Chinese capital markets function quite differently. The article argues that China’s state-owned exchanges facilitate the development of state-capitalist capital markets – capital markets that follow an institutional logic derived from China’s state-capitalist economic system. Rather than giving in to a neoliberal rulebook, China’s capital markets represent an alternative to, resist and challenge the norms, principles and procedures of the contemporary global financial order. While different capital markets share some characteristics, they are institutionally embedded, and these institutional settings facilitate different institutional logics that underpin and inform the functioning of markets. Instead of viewing capital markets as homogeneous entities, the article therefore proposes to investigate a ‘varieties of capital markets’ that are shaped by different institutional logics.

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Foreign bond investors and market discipline

Cited by 10 publications

References 88 publications

Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Coming to Terms: The Politics of Sovereign Bond Denomination

Same same, but different: Varieties of capital markets, Chinese state capitalism and the global financial order

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