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The emergence of market monitoring in Japanese banks: Evidence from the subordinated debt market

  • Imai, Masami

This paper uses a unique data set on the spreads of subordinated debts issued by Japanese banks to investigate the presence of market monitoring. The results show that subordinated debt investors punished risky banks by requiring higher interest rates. Moreover, I find that the sensitivity of spreads to bank risk increased dramatically after the Japanese government allowed a large city bank, Hokkaido Takushoku Bank, and passed Financial Reform Act and the Rapid Revitalization Act in the late 1990s.

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

Volume (Year): 31 (2007)
Issue (Month): 5 (May)
Pages: 1441-1460

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Handle: RePEc:eee:jbfina:v:31:y:2007:i:5:p:1441-1460
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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