A Primer on Market Discipline and Governance of Financial Institutions for Those in a State of Shocked Disbelief
Joseph Hughes and
Loretta Mester
Departmental Working Papers from Rutgers University, Department of Economics
Abstract:
Self regulation encouraged by market discipline constitutes a key component of Basel II’s third pillar. But high-risk investment strategies may maximize the expected value of some banks. In these cases, does market discipline encourage risk-taking that undermines bank stability in economic downturns? This paper reviews the literature on corporate control in banking. It reviews the techniques for assessing bank performance, interaction between regulation and the federal safety net with market discipline on risk-taking incentives and stability, and sources of market discipline, including ownership structure, capital market discipline, product market competition, labor market competition, boards of directors, and compensation.
Keywords: banking (search for similar items in EconPapers)
JEL-codes: D20 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2012-06-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
http://www.sas.rutgers.edu/virtual/snde/wp/2012-04.pdf (application/pdf)
Related works:
Working Paper: A primer on market discipline and governance of financial institutions for those in a state of shocked disbelief (2012) 
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:rut:rutres:201204
Access Statistics for this paper
More papers in Departmental Working Papers from Rutgers University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().