Market discipline across bank governance models: Empirical evidence from German depositors

Market discipline in South Asia: Evidence from commercial banking sector

“…To ensure the presence of market discipline, it is essential that (a) accurate information is disclosed to the public, (b) the participants in the market are able to process it properly and (c) there are no barriers to market signals (Arnold, Größl, & Koziol, 2016). This is particularly important given that provision of transparent information is one of the primary factors affecting customer's trust in a bank (Skvarciany & Jureviciene, 2017).…”

Market Discipline and Bank Risk-Taking: The Interbank Deposit Perspective

“…The findings on these research papers are consistent with existence of market discipline. Conversely, Arnold et al, (2016) find that savers in German are patient with troubled banks as they are not quick to withdraw part of their savings invested deposit and charge higher risk premia.…”

“…Alternatively, it can be argued that greater loan loss provisions explain that banks are at more nonperforming risky loans exposure. The second measure is liquidity risk expressed as the ratio of liquid assets to total assets, LIQTA (Arnold et al, 2016;Hadad et al, 2011). Liquidity risk accentuates banks to hold sufficient reserves and liquid assets, thus, be able to liquidate due debts and avoid loss of depositors' confidence.…”

“…A central argument is that if market discipline governance works well as the traditional prudential regulations used to do, there will be high likelihood of disproportionate bank risk-taking to fall. A bag of academic research on the association between market discipline and bank risk-taking looks at well-informed financial investors, and ignores the important group, small depositors (Arnold et al, 2016). In addition, few of these disentangle between interbank deposits and issued subordinated debt as measurement of market discipline.…”

Market Discipline in Banking: The Jordanian Experience

“…In addition, some researchers examine the impact of bank risk measures on the growth rate in deposits or on banks' interest expense. Imai (2008), Ioannidou and de Dreu (2010), Barajas and Catalan (2011), Murata and Hori (2011), Cubillas et al (2012), Karas et al (2012), Thiratanapong (2012), Arnold et al (2015), and Berger and Turk-Ariss (2015) are some of those researchers that used this methodology. For example, based on a total of 2038 banks that operate in the USA, 21 European countries, and in Switzerland, the subperiods 1997-2007 and 2008-2009, and using deposit growth as the dependent variable, it is stated that "we find significant depositor discipline prior to the crisis in both the US and EU… We also find that depositor discipline mostly decreased during the crisis, except for the case of small US banks" (Berger and Turk-Ariss, 2015).…”