Interbank deposits and market discipline: Evidence from Central and Eastern Europe

Isabelle Distinguin, Tchudjane Kouassi and Amine Tarazi

Journal of Comparative Economics, 2013, vol. 41, issue 2, 544-560

Abstract: There is a considerable debate on the role played by market discipline in the banking industry. Using data for 207 banks across 10 Central and Eastern European countries, this paper empirically analyzes the disciplining role of interbank deposits. We find that market discipline has been effective in Central and Eastern Europe since the implementation of explicit deposit insurance. However, several factors affect the strength of this discipline. State-owned banks are not disciplined probably because they benefit from implicit insurance. Institutional and legal factors, and resolution strategies adopted by countries during banking crises also impact bank risk and the effectiveness of market discipline. Our results indicate that stronger regulatory discipline reduces risk but also weakens market discipline.

Keywords: Bank risk; Market discipline; Interbank deposits; Transition economics (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0147596712000625
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Interbank Deposits and Market Discipline: Evidence from Central and Eastern Europe (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:41:y:2013:i:2:p:544-560

DOI: 10.1016/j.jce.2012.07.005

Access Statistics for this article

Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland

More articles in Journal of Comparative Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().