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Banking crises and market discipline: International evidence

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  • Cubillas, Elena
  • Fonseca, Ana Rosa
  • González, Francisco
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    Abstract

    This paper analyzes the effect of banking crises on market discipline in an international sample of banks. We also evaluate how bank regulation, supervision, institutions, and crisis intervention policies shape the effect of banking crises on market discipline. We control for unobservable bank, country, and time specific effects using a panel data set of banks from 66 countries around 79 banking crises. The results suggest that on average market discipline weakens after a banking crisis. This weakening is higher in countries where bank regulation, supervision, and institutions promoted market discipline before the banking crisis, and where a more accommodative approach is adopted to resolve it.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 36 (2012)
    Issue (Month): 8 ()
    Pages: 2285-2298

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    Handle: RePEc:eee:jbfina:v:36:y:2012:i:8:p:2285-2298

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Market discipline; Banking crisis; Crisis intervention; Regulation; Supervision; Institutions;

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    Cited by:
    1. Haq, Mamiza & Faff, Robert & Seth, Rama & Mohanty, Sunil, 2014. "Disciplinary tools and bank risk exposure," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 37-64.

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