Market Discipline and Bank Risk Taking: Evidence from the East Asian Banking Sector

Hamid, Fazelina Sahul; Yunus, Norhanishah Mohd

doi:10.11644/kiep.eaer.2017.21.1.322

Cited by 5 publications

(3 citation statements)

References 35 publications

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“…Ensuing this irregularity, the estimated z-score used may be an issue. Second, few moderating variables are employed in this study (for more constrained variables, see Fazelina Sahul & Norhanishah Mohd, 2017;Hoang et al, 2014). Noting these drawbacks, the investigation of bank risk sensitivity to market discipline when charter value is constrained is less examined in the empirical banking evidence, thus, meriting future research.…”

Section: Limitationsmentioning

confidence: 99%

“…To the best of my knowledge, there is no study that looks at this connection as an illustrative case in Tanzania banking industry. Few empirical extant studies examine market discipline and bank risk-taking relation (Fazelina Sahul & Norhanishah Mohd, 2017;Hoang et al, 2014;Nier & Baumann, 2006).…”

Section: Introductionmentioning

confidence: 99%

“…Following prior studies(Fazelina Sahul & Norhanishah Mohd, 2017;Hoang et al, 2014;Nier & Baumann, 2006), market discipline is measured as interbank deposit scaled by total deposit. Consistent with the augment that market discipline reduces risk, interbank deposits variable is selected as is not covered by explicit deposit in-Journal of Financial Risk Managementsurance policy and banks are expected to be informed investors on the magnitude of risk through the interbank market.…”

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confidence: 99%

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

Kato¹

2021

JFRM

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This paper investigates the relation between market discipline and bank risk-taking for Tanzanian commercial banks during the period 2009-2017. In the fixed effect (within) estimator, it uncovers mixed results. It found some support that market discipline exists and via interbank deposit reduced bank risk (i.e. credit risk). Contrary to expectation, the finding exhibits that the link between the interaction of market discipline and bank capital on bank risk is negative and statistically significant. It is also evident that bank capital, off-balance items, and size better explain the variation in bank risk. The results serve as a policy hint to banks' regulators and policymakers in strengthening market discipline framework for the reduction of bank risk-taking.

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Section: Limitationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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

Kato¹

2021

JFRM

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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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Transparency and market discipline: evidence from the Russian interbank market

Guillemin

Semenova

2020

Ann Finance

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Market Discipline and Bank Risk Taking: Evidence from the East Asian Banking Sector

Cited by 5 publications

References 35 publications

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

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

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

Transparency and market discipline: evidence from the Russian interbank market

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