TY - JOUR
T1 - Disciplinary tools and bank risk exposure
AU - Haq, Mamiza
AU - Faff, Robert
AU - Seth, Rama
AU - Mohanty, Sunil
PY - 2014
Y1 - 2014
N2 - We investigate the impact of bank capital, market discipline and charter value as bank disciplinary tools on both bank equity risk (systematic risk, total risk, and idiosyncratic risk) and default risk/credit risk. We analyse 218 listed banks across 15 Asia-Pacific countries, and find that bank risk is positively related to bank capital and negatively related to charter value. Consistent with Pillar 3, Basel II and Basel III, we also find that bank risk is negatively associated with market discipline. Further, our results provide evidence that market discipline complements bank capital while market discipline substitutes bank self-disciplinary tools such as charter value. Finally, the magnitude of the charter value coefficient fall dramatically with the global financial crisis across all risk measures. The results are robust to different estimation specifications.
AB - We investigate the impact of bank capital, market discipline and charter value as bank disciplinary tools on both bank equity risk (systematic risk, total risk, and idiosyncratic risk) and default risk/credit risk. We analyse 218 listed banks across 15 Asia-Pacific countries, and find that bank risk is positively related to bank capital and negatively related to charter value. Consistent with Pillar 3, Basel II and Basel III, we also find that bank risk is negatively associated with market discipline. Further, our results provide evidence that market discipline complements bank capital while market discipline substitutes bank self-disciplinary tools such as charter value. Finally, the magnitude of the charter value coefficient fall dramatically with the global financial crisis across all risk measures. The results are robust to different estimation specifications.
KW - Asia Pacific
KW - bank capital
KW - tools
UR - http://handle.uws.edu.au:8081/1959.7/uws:30778
U2 - 10.1016/j.pacfin.2013.10.005
DO - 10.1016/j.pacfin.2013.10.005
M3 - Article
SN - 0927-538X
VL - 26
SP - 37
EP - 64
JO - Pacific-Basin Finance Journal
JF - Pacific-Basin Finance Journal
ER -