Market Discipline and Bank Charter Value: The Case of Two Safe Banking Industries

Mamiza Haq (1) , Amine Tarazi (2) , Necmi Avkiran (3) , Ana Rosa Fonceca (4)

1 UQ Business School. The University of Queensland. Queensland 4072, Australia
2 LAPE - Laboratoire d'Analyse et de Prospective Economique
3 UQ Business School. The University of Queensland. Queensland 4072, Australia.
4 Department of Business Administration, School of Economics and Business, University of Oviedo, Avenida del Cristo, Oviedo, Spain

This paper analyses the relationship between market discipline and bank charter value using a panel dataset of publicly-listed domestic banks in Australia and Canada over the 1995-2011 periods, with particular focus on the 2007/2008 global financial crisis (GFC). Overall, our results show a positive relationship between market discipline and bank charter value, although this has reduced in the post-GFC period. Furthermore, our findings reveal that in the presence of market discipline, bank capital, contingent liabilities, and non-interest income are important sources of charter value. These findings have important policy implications related to bank safety and soundness. The results are robust to model specification.

Mots clés: charter value; market discipline; global financial crisis

Domaines: Sciences de l'Homme et Société; Economies et finances

Mamiza Haq, Amine Tarazi, Necmi Avkiran, Ana Rosa Fonceca. Market Discipline and Bank Charter Value: The Case of Two Safe Banking Industries. 2013. ⟨hal-00955135⟩