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Bank risk, charter value and depositor discipline: a simultaneous equations approach

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  • Saibal Ghosh

Abstract

Using data on listed Indian banks for 1996-2006, the article finds that charter value, depositor discipline and bank risk-taking are intertwined, with each tending to reinforce the other. Whereas charter value is found to be a nonlinear determinant of market discipline, the latter is found to positively impact charter value. Additionally, higher risk-taking is found to exert a weakening effect on market discipline.

Suggested Citation

  • Saibal Ghosh, 2009. "Bank risk, charter value and depositor discipline: a simultaneous equations approach," Applied Economics Letters, Taylor & Francis Journals, vol. 16(6), pages 639-644.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:6:p:639-644
    DOI: 10.1080/17446540802243775
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    References listed on IDEAS

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    1. Reint Gropp & Jukka Vesala, 2004. "Deposit Insurance, Moral Hazard and Market Monitoring," Review of Finance, European Finance Association, vol. 8(4), pages 571-602.
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    7. Saibal Ghosh, 2007. "Promoting market discipline through interest rates: does financial liberalization matter?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(2), pages 135-143.
    8. Nier, Erlend & Baumann, Ursel, 2006. "Market discipline, disclosure and moral hazard in banking," Journal of Financial Intermediation, Elsevier, vol. 15(3), pages 332-361, July.
    9. Lindquist, Kjersti-Gro, 2004. "Banks' buffer capital: how important is risk," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 493-513, April.
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    Cited by:

    1. Saibal Ghosh, 2009. "Charter value and risk-taking: evidence from Indian banks," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 14(3), pages 270-286.
    2. Yassine Bakkar & Clovis Rugemintwari & Amine Tarazi, 2017. "Charter value and bank stability before and after the global financial crisis of 2007-2008 Charter value and bank stability before and after the global financial crisis of 2007-2008," Working Papers hal-01337601, HAL.
    3. Po-Chin Wu & Sheng-Chieh Pan & Xue-Ling Tai, 2015. "Non-linearity, persistence and spillover effects in stock returns: the role of the volatility index," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 597-613, August.

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