Journal article
Market discipline, financial crisis and regulatory changes: Evidence from Indonesian banks
Journal of Banking & Finance, Vol.35(6), pp.1552-1562
2011
Abstract
Following the 1997/1998 financial crisis, Indonesian banks experienced major regulatory changes, including the adoption of the blanket guarantee scheme (BGS) in 1998, a limited guarantee (LG) in 2005, and changes in capital regulation in 1998 and 2001. We examine the impact of these regulatory changes on market discipline during the period 1995-2009. The price of deposits is used to measure market discipline in a dynamic panel data methodology on a sample of 104 commercial banks. We find a weakening of market discipline following the introduction of the BGS. The result is consistent with the deposit insurance scheme being credible in the lower capital requirement environment. The adoption of LG in a recovering economy also mitigates the role of market discipline. However, market discipline is more pronounced in listed banks than unlisted banks and in foreign banks than domestic banks. These results have important implications for banking regulation and supervision, particularly during a crisis period.
Details
- Title
- Market discipline, financial crisis and regulatory changes: Evidence from Indonesian banks
- Authors/Creators
- M.D. Hadad (Author/Creator) - Bank IndonesiaA. Agusman (Author/Creator) - Bank IndonesiaG.S. Monroe (Author/Creator) - UNSW SydneyD. Gasbarro (Author/Creator) - Murdoch UniversityJ.K. Zumwalt (Author/Creator) - Colorado State University
- Publication Details
- Journal of Banking & Finance, Vol.35(6), pp.1552-1562
- Publisher
- Elsevier BV
- Identifiers
- 991005545000007891
- Copyright
- © 2010 Elsevier B.V.
- Murdoch Affiliation
- Do not use- Former Murdoch Business School
- Language
- English
- Resource Type
- Journal article
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