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Depositor Discipline and Bank Risk-Taking Behavior: Evidence From the South-East Asian Financial Crises

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  • M. Kabir Hassan
  • M. Ershad Hussain

Abstract

This paper examines whether the risk-taking behavior of commercial banks in five countries of South-East Asia changed after the Asian Crises of 1997. The paper utilizes the framework created by Gruben et al (1997, 1998, and 2003). It also examines the connection between the risk-taking behavior and depositor discipline of these banks after the Asian Crises of 1997. Based on bank level data from the Bank Scope, 2005 CD, he paper presents evidence that the state of depositor discipline is very weak in the selected countries even after the Asian Crises. Evidence also shows that the risk taking behavior of commercial banks did not change much before and after the Asian Crises of 1997, and that perfect competition prevailed both before and after the Crises in the banking sector. Finally, evidence also shows that the there is no connection between risk-taking behavior and depositor discipline.

Suggested Citation

  • M. Kabir Hassan & M. Ershad Hussain, 2006. "Depositor Discipline and Bank Risk-Taking Behavior: Evidence From the South-East Asian Financial Crises," NFI Working Papers 2006-WP-13, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfiwps:2006-wp-13
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    References listed on IDEAS

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    2. International Monetary Fund, 2009. "Paraguay: Selected Issues," IMF Staff Country Reports 2009/184, International Monetary Fund.

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    Keywords

    Depositor discipline; commercial banks;

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