Market Discipline in Emerging Economies: Beyond Bank Fundamentals

Eduardo Levy Yeyati, Maria Martinez Peria and Sergio Schmukler

Business School Working Papers from Universidad Torcuato Di Tella

Abstract: This paper studies how institutional factors and systemic risks (driven by macroeconomic conditions) prevalent in emerging economies may impact market discipline among banks (traditionally understood as market responses to bank fundamentals). First, we discuss how certain institutional features of emerging economies (underdeveloped capital markets, pervasive government ownership of banks, greater guarantees, inadequate disclosure and transparency) may affect market responses to bank risk. Second, using the recent Argentine crisis as an illustration, we argue that systemic risks may exert an overwhelming impact on market behavior, overshadowing the link between the latter and bank fundamentals. Thus, market discipline, while missing in the traditional sense, may be indeed quite robust once systemic risks are factored in. We conclude that in emerging economies the analysis of market discipline should take into account the importance of institutional and systemic factors.

Pages: 16 pages
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-012004.pdf (application/pdf)

Related works:
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:udt:wpbsdt:marketdiscipline

Access Statistics for this paper

More papers in Business School Working Papers from Universidad Torcuato Di Tella Contact information at EDIRC.
Bibliographic data for series maintained by Nicolás Del Ponte ( this e-mail address is bad, please contact ).