Market discipline and the evaluation of Euro financial bonds--An empirical analysis
AbstractWithin the context of the increasing discussion on a shift in financial regulatory philosophy from the currently prevailing rules-based approach to a more incentive-based supervisory procedure in which market discipline should play a decisive role in overcoming several moral hazard and efficiency problems of the financial system, the question regarding the evaluation of financial bonds has gained an important dimension. Such a disciplining market influence could namely be exercised if financial institutions were obliged to issue subordinated bonds on a regular basis (mandatory subordinated debt policy). However, the influence of market discipline will only be effective if the evaluation of different subordinated (and other) bonds occurs in a differentiated manner and dependent on the inherent risks. This study provides findings, on the basis of which this requirement for the Euro financial bond market can be regarded as fulfilled.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in International Business and Finance.
Volume (Year): 24 (2010)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/ribaf
Euro financial bonds Market discipline Financial stability Bond evaluation Subordinated debt policy;
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