Market Discipline of Subordinated Debt:Empirical Evidence from Japanese commercial banks
There have been public policy proposals regarding bank supervision based on the hypothesis that the presence of subordinated note and debenture (SND) holders cause banks to take less risk. In this paper, we test the market discipline hypothesis by comparing the balance sheets of Japanese commercial banks from two successive years. The cross-section regression shows that banks took less risk as the issued amount of SNDs increase. Specifically, the loan risk measure, the ratio of impaired loans to the total loans showed a decrease. Also, the stock investment risk measure, which is the invested stocks over bank capital, decreased more as the level of SND amounts increased. These results provide evidence on the effectiveness of SNDs as a market discipline instrument.
Market Discipline Subordinated Debt Japanese Commercial Banks Loan Risk Stock Investment Risk component
Young-Soon Hwang Hong-Ghi Min
Busan Development Institute Busan, Republic of Korea Department of Management Science KAIST Daejeon, Republic of Korea
国际会议
上海
英文
568-573
2011-03-11（万方平台首次上网日期，不代表论文的发表时间）