Market Discipline and the Banking Industry

2009 ◽  
pp. 169-191
Author(s):  
David VanHoose
Keyword(s):  
Banking Industry ◽  
Market Discipline

Market discipline in the Brazilian banking industry: an analysis for the subordinated debt holders

2009 ◽  
Vol 36 (3) ◽  
pp. 286-307 ◽  
Author(s):  
Helder Ferreira de Mendonça ◽  
Renato Falci Villela Loures
Keyword(s):  
Banking Industry ◽  
Market Discipline ◽  
Subordinated Debt ◽  
Debt Holders

scholarly journals Does the agency problem exist in Korean banking industry?

2009 ◽  
Vol 6 (4) ◽  
pp. 551-555
Author(s):  
Seok Weon Lee
Keyword(s):  
Panel Data ◽  
Cash Flow ◽  
Risk Taking ◽  
Banking Industry ◽  
Agency Problem ◽  
Market Discipline ◽  
Financial Industry ◽  
Government Regulations ◽  
Banking Regulations ◽  
Bank Managers

In this paper, we empirically examine whether the agency problem exists in Korean banking industry. Banking industry may be a very special type of industry where government regulations are prevailing and market discipline may function less effectively than in other industries. Investors and even bankers themselves may believe that regulators will not let them fail because it can cause much bigger damage to the economy especially when banking regulations are very loose. Therefore investors would not have great incentives to monitor the behavior of banks, and bank managers could pursue riskier strategies than the firms in other industries do without worrying about the possible loss of their jobs due to the bad performance and reputation of their management. But when regulations are very tight bank managers would realize that closing down and bankruptcy of the bank is not hard to occur, and therefore, they would act in a more conservative and risk aversive manner, which is the case where the agency problem arises. From the analysis of the panel data, we find consistent evidences that the agency problem does not appear to exist in Korean banking industry before 1998 period, when regulations are very loose, which is consistent with our presumption. We find positive associations between the level of outside share ownership and risk-taking for the period of pre-1998. But this association becomes weaker for the post-regulation period 1998-2005. As the regulations become tighter, agency problem becomes bigger which will be the loss, anyway, of firm‟s cash flow, while the regulations may have some effectiveness in bringing more safety of the industry. Thus, regulators and the firms in financial industry need to develop better systems to minimize the costs associated with agency problem when making regulatory reforms.

scholarly journals Relationship between market discipline and capital buffers in Brazilian banks,

2021 ◽  
Vol 32 (85) ◽  
pp. 109-125
Author(s):  
José Alves de Carvalho ◽  
José Alves Dantas
Keyword(s):  
Banking Industry ◽  
Emerging Market ◽  
Positive Association ◽  
Banking Regulation ◽  
Developed Countries ◽  
Market Discipline ◽  
Regulatory Requirement ◽  
Risk Appetite ◽  
Empirical Tests ◽  
The Difference

ABSTRACT The aim of this study was to investigate the relationship between the market discipline and the capital buffers of Brazilian banks, identifying the channels through which this phenomenon materializes. The literature on market discipline and capital buffers has focused on developed countries. In Brazil, the topic is in its infancy, despite the characteristics of the market representing a relevant opportunity for broadening the related studies. Even with the specificities of an emerging market, the Brazilian banking industry provides a vast field for studying market discipline and capital buffers, given that the banks have leverage with investors, who are sensitive agents to alterations in the risk appetite of those entities. This study contributes to understanding the dynamics of the market discipline in the banking industry and to fostering discussions about the role of that private supervision in promoting the transparency and solidity of the financial system, providing support and guidelines for banking regulation. Using data from 193 Brazilian banks, from 2001 to 2017, the empirical tests included the estimation of panel data models, with the use of two-stage least squares (TSLS), following Ayuso et al. (2004), Flannery and Rangan (2004), and Nier and Baumann (2006). As the discipline exercised by the monitoring and influence of the market is not directly verifiable by external agents, six proxies were developed based on the cost of fundraising, on unsecured deposits, on subordinated debt, and on disclosure. The capital buffer was represented by the difference between the capital calculated by the institution and the minimum regulatory requirement. The results of the empirical tests revealed a positive association between the capital buffer and market discipline, providing evidence of the presence of that private supervision in the Brazilian banking industry.

scholarly journals Banking Crises and Market Discipline in Indonesian Banking Industry

2017 ◽  
Vol 19 (1) ◽  
Author(s):  
George Adam Sukoco Sikatan ◽  
Rokhim Rokhim
Keyword(s):  
Banking Industry ◽  
Banking Crises ◽  
Market Discipline

scholarly journals Corporate control and governance in banking

2004 ◽  
Vol 1 (4) ◽  
pp. 94-107 ◽  
Author(s):  
M. Kabir Hassan ◽  
David R. Wolfe ◽  
Neal C. Maroney
Keyword(s):  
Corporate Governance ◽  
Banking Industry ◽  
Corporate Control ◽  
Agency Problems ◽  
Market Discipline ◽  
The State ◽  
Regulatory Oversight

Banking firms face an industry specific set of agency problems. The heavily regulated nature of the industry alters the shareholder/manger relationship. The scope of market discipline in the industry is severely limited due to regulatory oversight. This article surveys the state of the corporate governance literature with an emphasis on reviewing the agency problems unique to the banking industry.

Sign in / Sign up

Export Citation Format

Share Document