IDEAS home Printed from https://ideas.repec.org/a/ris/eaerev/0322.html
   My bibliography  Save this article

Market Discipline and Bank Risk Taking: Evidence from the East Asian Banking Sector

Author

Listed:
  • Hamid , Fazelina Sahul

    (Universiti Sains Malaysia)

  • Yunus , Norhanishah Mohd

    (Universiti Sains Malaysia)

Abstract

The third pillar of the Basel II highlights the role of market discipline in easing the existing pressure on traditional monitoring measures like capital requirement and government supervision. This study test the effectiveness of market discipline in inducing prudential risk management practices among the East Asian banks over the 1995 to 2005 period. Market discipline is measured using information disclosure and interbank deposit holdings. We find that only the latter is an effective market discipline tool. However, the former becomes effective when market concentration is higher. We find that government owned, foreign owned and recapilatised banks are subject to market disciplining when disclosure in taken account but the opposite is true when interbank deposits is taken into account. Finally, we find that banks that disclose more risk related information hold more capital against their non-performing loan. The implications of the findings are discussed.

Suggested Citation

  • Hamid , Fazelina Sahul & Yunus , Norhanishah Mohd, 2017. "Market Discipline and Bank Risk Taking: Evidence from the East Asian Banking Sector," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 21(1), pages 29-57, March.
    • Handle: RePEc:ris:eaerev:0322
    DOI: 10.11644/KIEP.EAER.2017.21.1.322
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.11644/KIEP.EAER.2017.21.1.322
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.11644/KIEP.EAER.2017.21.1.322?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Market Discipline; Bank Risk Taking; Information Disclosure; Panel Data; East Asian Banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:eaerev:0322. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: JE Lee (email available below). General contact details of provider: https://edirc.repec.org/data/kieppkr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.