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Market Discipline and Bank Charter Value: The Case of Two Safe Banking Industries

  • Mamiza Haq

    (UQ Business School. The University of Queensland. Queensland 4072, Australia - T)

  • Amine Tarazi

    ()

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société)

  • Necmi Avkiran

    (UQ Business School. The University of Queensland. Queensland 4072, Australia. - T)

  • Ana Rosa Fonceca

    (Department of Business Administration, School of Economics and Business, University of Oviedo, Avenida del Cristo, Oviedo, Spain - U)

This paper analyses the relationship between market discipline and bank charter value using a panel dataset of publicly-listed domestic banks in Australia and Canada over the 1995-2011 periods, with particular focus on the 2007/2008 global financial crisis (GFC). Overall, our results show a positive relationship between market discipline and bank charter value, although this has reduced in the post-GFC period. Furthermore, our findings reveal that in the presence of market discipline, bank capital, contingent liabilities, and non-interest income are important sources of charter value. These findings have important policy implications related to bank safety and soundness. The results are robust to model specification.

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Paper provided by HAL in its series Working Papers with number hal-00955135.

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Date of creation: 30 Oct 2013
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Handle: RePEc:hal:wpaper:hal-00955135
Note: View the original document on HAL open archive server: http://hal-unilim.archives-ouvertes.fr/hal-00955135
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