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Market discipline in banking: evidence from Thailand during the 1997 crisis

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  • Nuntawan Thiratanapong

Abstract

This article investigates the impact of banking crisis on deposit market discipline using evidence from Thailand. The empirical evidence suggests that depositors' responsiveness to bank risk taking increases in the aftermath of the crisis. However, an explicit blanket guarantee provided by the government since the 1997 crisis weakens the extent of an increase in market discipline during the post-crisis period. The results have relevant implications on the implementation of an explicit deposit insurance scheme for Thailand.

Suggested Citation

  • Nuntawan Thiratanapong, 2007. "Market discipline in banking: evidence from Thailand during the 1997 crisis," Applied Economics Letters, Taylor & Francis Journals, vol. 14(8), pages 559-563.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:8:p:559-563
    DOI: 10.1080/13504850600592424
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    References listed on IDEAS

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    1. J. Caprio & P. Honohan, 2000. "Restoring Banking Stability: Beyond Supervised Capital Requirements," South African Journal of Economics, Economic Society of South Africa, vol. 68(1), pages 5-22, March.
    2. Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 273-305, August.
    3. María Soledad Martínez-Peria & Sergio Schmukler, 2002. "Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 5, pages 143-174, Central Bank of Chile.
    4. Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 375-399, March.
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    Cited by:

    1. Bernardo Quintanilla & Jesús Téllez & L. A. Wolfskill, 2011. "Bank Risk Fundamentals And Regulatory Discipline In The Mexican Banking Sector," Accounting & Taxation, The Institute for Business and Finance Research, vol. 3(2), pages 85-95.
    2. Ghassan Omet & Ibrahim Saif & Hadeel Yaseen, 2008. "Market Discipline and Deposit Insurance: Evidence from Some Middle Eastern Banks," Working Papers 391, Economic Research Forum, revised 01 Jan 2008.
    3. Anichul Khan & Hasnat Dewan, 2011. "Deposit insurance scheme and banking crises: a special focus on less-developed countries," Empirical Economics, Springer, vol. 41(1), pages 155-182, August.

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