Banking crises and market discipline: International evidence

Elena Cubillas, Ana Rosa Fonseca and Francisco González

Journal of Banking & Finance, 2012, vol. 36, issue 8, 2285-2298

Abstract: This paper analyzes the effect of banking crises on market discipline in an international sample of banks. We also evaluate how bank regulation, supervision, institutions, and crisis intervention policies shape the effect of banking crises on market discipline. We control for unobservable bank, country, and time specific effects using a panel data set of banks from 66 countries around 79 banking crises. The results suggest that on average market discipline weakens after a banking crisis. This weakening is higher in countries where bank regulation, supervision, and institutions promoted market discipline before the banking crisis, and where a more accommodative approach is adopted to resolve it.

Keywords: Market discipline; Banking crisis; Crisis intervention; Regulation; Supervision; Institutions (search for similar items in EconPapers)
JEL-codes: E43 G01 G21 G28 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (53)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:8:p:2285-2298

DOI: 10.1016/j.jbankfin.2012.04.011

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