Market discipline in the Latin American banking system: Testing depositor discipline, borrower discipline, and the internal capital market hypothesis

Edgar Demetrio Tovar-García

Resultado de la investigación

Resumen

This paper tests the existence of market discipline in the Latin American banking system using a variety of methods. It re-examines traditional tests on depositor discipline, controlling banks’ internal capital demand. In addition, it explores whether borrowers discipline bank risk-taking. This new hypothesis points out that low-quality banks issue fewer loans and charge lower interests rates. Contrary to the general view, our findings suggest weak presence of market discipline. These results are robust to different indicators of the key explanatory variables and econometric methods. For policymakers, this implies a necessity to restore market discipline following the Basel Accord.

Idioma originalEnglish
Páginas (desde-hasta)78-90
Número de páginas13
PublicaciónSpanish Review of Financial Economics
Volumen15
N.º2
DOI
EstadoPublished - 1 ene 2017

Huella dactilar

Market discipline
Banking system
Testing
Internal capital markets
Bank risk taking
Basel Accord
Charge
Interest rates
Loans
Econometric methods
Politicians

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Citar esto

@article{a2bb57c4e41a4a2c9b8ae6d82f8b3705,
title = "Market discipline in the Latin American banking system: Testing depositor discipline, borrower discipline, and the internal capital market hypothesis",
abstract = "This paper tests the existence of market discipline in the Latin American banking system using a variety of methods. It re-examines traditional tests on depositor discipline, controlling banks’ internal capital demand. In addition, it explores whether borrowers discipline bank risk-taking. This new hypothesis points out that low-quality banks issue fewer loans and charge lower interests rates. Contrary to the general view, our findings suggest weak presence of market discipline. These results are robust to different indicators of the key explanatory variables and econometric methods. For policymakers, this implies a necessity to restore market discipline following the Basel Accord.",
author = "Tovar-Garc{\'i}a, {Edgar Demetrio}",
year = "2017",
month = "1",
day = "1",
doi = "10.1016/j.srfe.2017.07.001",
language = "English",
volume = "15",
pages = "78--90",
journal = "Spanish Review of Financial Economics",
issn = "2173-1268",
publisher = "Elsevier Doyma",
number = "2",

}

TY - JOUR

T1 - Market discipline in the Latin American banking system

T2 - Testing depositor discipline, borrower discipline, and the internal capital market hypothesis

AU - Tovar-García, Edgar Demetrio

PY - 2017/1/1

Y1 - 2017/1/1

N2 - This paper tests the existence of market discipline in the Latin American banking system using a variety of methods. It re-examines traditional tests on depositor discipline, controlling banks’ internal capital demand. In addition, it explores whether borrowers discipline bank risk-taking. This new hypothesis points out that low-quality banks issue fewer loans and charge lower interests rates. Contrary to the general view, our findings suggest weak presence of market discipline. These results are robust to different indicators of the key explanatory variables and econometric methods. For policymakers, this implies a necessity to restore market discipline following the Basel Accord.

AB - This paper tests the existence of market discipline in the Latin American banking system using a variety of methods. It re-examines traditional tests on depositor discipline, controlling banks’ internal capital demand. In addition, it explores whether borrowers discipline bank risk-taking. This new hypothesis points out that low-quality banks issue fewer loans and charge lower interests rates. Contrary to the general view, our findings suggest weak presence of market discipline. These results are robust to different indicators of the key explanatory variables and econometric methods. For policymakers, this implies a necessity to restore market discipline following the Basel Accord.

UR - http://www.scopus.com/inward/record.url?scp=85028473975&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85028473975&partnerID=8YFLogxK

U2 - 10.1016/j.srfe.2017.07.001

DO - 10.1016/j.srfe.2017.07.001

M3 - Article

AN - SCOPUS:85028473975

VL - 15

SP - 78

EP - 90

JO - Spanish Review of Financial Economics

JF - Spanish Review of Financial Economics

SN - 2173-1268

IS - 2

ER -