Disciplinary tools and bank risk exposure

Haq, Mamiza, Faff, Robert, Seth, Rama and Mohanty, Sunil (2014) Disciplinary tools and bank risk exposure. Pacific-Basin Finance Journal, 26 37-64. doi:10.1016/j.pacfin.2013.10.005

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Author Haq, Mamiza
Faff, Robert
Seth, Rama
Mohanty, Sunil
Title Disciplinary tools and bank risk exposure
Journal name Pacific-Basin Finance Journal   Check publisher's open access policy
ISSN 0927-538X
Publication date 2014
Year available 2013
Sub-type Article (original research)
DOI 10.1016/j.pacfin.2013.10.005
Open Access Status
Volume 26
Start page 37
End page 64
Total pages 28
Place of publication Amsterdam, Netherlands
Publisher Elsevier North-Holland
Collection year 2014
Language eng
Formatted abstract
• Bank risk is positively associated with bank capital while negatively associated with charter value.
• Bank risk is negatively associated with market discipline.
• Market discipline complements bank capital.
• Market discipline substitutes for bank self-disciplinary tool such as charter value.

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 coefficients fall dramatically with the global financial crisis across all risk measures. The results are robust to different estimation specifications.
Keyword Bank risk
Bank capital
Charter value
Market discipline
Asia Pacific
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Available online: 29 October 2013.

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
UQ Business School Publications
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Citation counts: TR Web of Science Citation Count  Cited 5 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 4 times in Scopus Article | Citations
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Created: Sat, 02 Nov 2013, 20:44:52 EST by Mamiza Haq on behalf of UQ Business School