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Pré-publication, Document de travail

Bank Risk - Return Efficiency and Bond Spread: Is There Evidence of Market Discipline in Europe

Abstract : The aim of this paper is to empirically investigate the relationship between bank risk-return efficiency and bond spread priced in the primary market. Our study is based on a sample of European listed banks for the period 1996-2011. Applying a parametric frontier based on the Battese and Coelli (1993) model, we can compute risk-return efficiency score for each bank at each date. Compared to previous studies, we investigate the effectiveness of market discipline taking into account not only risk and return independently, but also the level of profitability for a given level of risk on the pricing of bond spread. We find that, over the complete sample period, bondholders require a higher spread from more inefficient banks. A closer analysis actually shows that market discipline is not effective during sound economic period, but market investors comes to discipline banks during distressed economic period by pricing lower spread to more efficient banks.
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Pré-publication, Document de travail
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https://hal-unilim.archives-ouvertes.fr/hal-00916717
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Soumis le : mardi 10 décembre 2013 - 16:00:16
Dernière modification le : vendredi 6 mars 2020 - 02:06:09
Archivage à long terme le : : vendredi 14 mars 2014 - 10:06:42

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  • HAL Id : hal-00916717, version 1

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Cécile Casteuble, Emmanuelle Nys, Philippe Rous. Bank Risk - Return Efficiency and Bond Spread: Is There Evidence of Market Discipline in Europe. 2013. ⟨hal-00916717⟩

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