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

Author

Listed:
  • Mamiza Haq

    (UQ [All campuses : Brisbane, Dutton Park Gatton, Herston, St Lucia and other locations] - The University of Queensland)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Necmi Avkiran

    (UQ [All campuses : Brisbane, Dutton Park Gatton, Herston, St Lucia and other locations] - The University of Queensland)

  • Ana Rosa Fonceca

    (Universidad de Oviedo = University of Oviedo)

Abstract

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.

Suggested Citation

  • Mamiza Haq & Amine Tarazi & Necmi Avkiran & Ana Rosa Fonceca, 2013. "Market Discipline and Bank Charter Value: The Case of Two Safe Banking Industries," Working Papers hal-00955135, HAL.
    • Handle: RePEc:hal:wpaper:hal-00955135
    Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-00955135
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