The cost of market versus regulatory discipline in banking

• 成果类型: Article
• 署名作者: Billett, MT; Garfinkel, JA; O'Neal, ES
• 署名单位: University of Miami; Loyola University Chicago; University System Of New Hampshire; University of New Hampshire
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(98)00014-2
• 发表日期: 1998
• 页码: 333-358
• 关键词: market discipline; banking; insured deposits

摘要

We present evidence that insured deposit financing shields banks from the full costs of market discipline. Moody's downgrades, indicators of increasing risk, are associated with negative abnormal equity returns that are increasing in the bank's reliance on insured deposits. Moreover, banks raise their use of insured deposits following increases in risk. These findings cast doubt on the ability of capital market participants to effectively discipline bank behavior within the current regulatory environment. More generally, our findings highlight the potential for regulation to undermine market discipline in regulated industries. (C) 1998 Elsevier Science S.A. All rights reserved.