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Bank Quality, Loan Demand, and Market Discipline

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  • Zeynep Önder
  • Süheyla Özyıldırım

Abstract

In this paper, we examine the disciplinary role of borrowers, who are one of the key stakeholders in Turkish banks and are heavily affected when their banks experience difficulty. In the theoretical model, we show that borrowers prefer to have a relationship with less risky banks although it increases their cost of getting funds. Empirically, we examine the relationship between quality of a bank and its loan demand and find that as riskiness of a bank decreases, its loan demand increases significantly, suggesting the disciplinary role of borrowers in Turkey.

Suggested Citation

  • Zeynep Önder & Süheyla Özyıldırım, 2014. "Bank Quality, Loan Demand, and Market Discipline," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(4), pages 61-72.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:4:p:61-72
    DOI: 10.2753/REE1540-496X500404
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