The Emergence of Market Monitoring in Japanese Banks: Evidence from the Subordinated Debt Market

Masami Imai

No 2006-008, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: This paper uses a unique data set on the spreads of subordinated debts issued by Japanese banks to investigate the presence of market monitoring. The results show that subordinated debt investors punished risky banks by requiring higher interest rates. Moreover, I find that the sensitivity of spreads to bank risk increased dramatically after the Japanese government allowed a large city bank, Hokkaido Takushoku Bank, and passed Financial Reform Act and the Rapid Revitalization Act in the late 1990s.

Keywords: Market Discipline; Subordinated Debts; Japanese Bank (search for similar items in EconPapers)
JEL-codes: G21 G28 O53 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-01
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-sea
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Published in the Journal of Banking and Finance (Volume 31, Issue 5 , May 2007, Pages 1441-1460)

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http://dx.doi.org/10.1016/j.jbankfin.2006.07.007
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Journal Article: The emergence of market monitoring in Japanese banks: Evidence from the subordinated debt market (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2006-008

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