Market discipline, financial crisis and regulatory changes: Evidence from Indonesian banks

Hadad, Muliaman D.; Agusman, Agusman; Monroe, Gary S.; Gasbarro, Dominic; Zumwalt, J. Kenton

doi:10.1016/j.jbankfin.2010.11.003

Cited by 111 publications

(128 citation statements)

References 24 publications

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“…(), and Hadad et al. (), bank risks (the independent variables) are measured using several accounting ratios . These include the capital adequacy ratio (CAR) measured as the eligible Tier 1 and Tier 2 capital to total risk‐adjusted assets as a proxy for capital risk, and the ratio of loan loss provisions to total gross loans (LLPTL) as a proxy for credit risk.…”

Section: Methodsmentioning

confidence: 99%

“…(), and Hadad et al. () all find a weakening effect of deposit insurance on market discipline. Our paper is more related to Karas et al.…”

Section: Introductionmentioning

confidence: 94%

“…The price‐based approach used by Baer and Brewer (), Hannan and Hanweck (), and Hadad et al. () focuses on the relation between the interest rates on deposits and bank risk . In general, these studies find evidence of market discipline as riskier banks pay higher interest rates for deposits.…”

Section: Literature Reviewmentioning

confidence: 99%

“…(), and an Indonesian study by Hadad et al. (). Demirguc‐Kunt and Huizinga () compare market discipline in countries with and without explicit deposit insurance and find that explicit deposit insurance reduces deposit interest rates and lowers market discipline of bank risk taking.…”

Section: Introductionmentioning

confidence: 99%

“…With single country studies, Mondschean and Opiela (), Ioannidou and de Dreu (), and Hadad et al. () examine the impact of adopting deposit insurance in Poland, Bolivia, and Indonesia, respectively, by comparing the market discipline by a given group of depositors pre‐ and post‐insurance, and find that it weakened market discipline. Their results, however, may be affected by time‐specific factors other than the introduction of insurance.…”

Section: Introductionmentioning

confidence: 99%

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Market Discipline and Deposit Guarantee: Evidence from Australian Banks

et al. 2014

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This study examines depositor market discipline of Australian banks and its interaction with the 2008 deposit and wholesale funding guarantee. Prior to 2008 market discipline is found for Australian-incorporated banks. Depositors did not distinguish between major and small banks, but some differences in the degree of market discipline were found for foreign bank subsidiaries. Following the introduction of the 2008 guarantees, market discipline was reduced except for nonhousehold depositors at banks that did not access the wholesale guarantee. Market discipline is also evidenced at foreign bank branches, but weaker for those accessing the wholesale guarantee. JEL classification: G21; G28.

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Section: Methodsmentioning

confidence: 99%

“…(), and Hadad et al. () all find a weakening effect of deposit insurance on market discipline. Our paper is more related to Karas et al.…”

Section: Introductionmentioning

confidence: 94%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Market Discipline and Deposit Guarantee: Evidence from Australian Banks

et al. 2014

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Bank deposits and Google searches in a crisis economy: Bayesian non‐linear evidence for Greece (2009–2015)

2020

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Due to a variety of reasons, the Greek economy faced a severe crisis being a member of EMU. Nonetheless, the country's banking system experienced a dramatic outflow of deposits, in the period 2009–2015. The present paper attempts to shed light on the possibility of forecasting bank deposits, based on the keyword “Grexit” of Google searches. In this context, apart from standard forecasting models like AR (p) and ARDL (p, q) we estimate a novel Neural Network ARDL (p, q, G) model and its respective Bayesian modification. We show that extending standard autoregressive models with the information provided by Internet Searches leads to significant improvement in the forecasting accuracy of the Bank Deposits, compared with other standard models. Furthermore, the forecasting performance of the models, which are extended with Google searches, is shown to be better than models containing only the well‐known indicators. Our findings are robust and econometrically sound.

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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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Market discipline, financial crisis and regulatory changes: Evidence from Indonesian banks

Cited by 111 publications

References 24 publications

Market Discipline and Deposit Guarantee: Evidence from Australian Banks

Market Discipline and Deposit Guarantee: Evidence from Australian Banks

Bank deposits and Google searches in a crisis economy: Bayesian non‐linear evidence for Greece (2009–2015)

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

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