Evidence of Bank Market Discipline in Subordinated Debenture Yields: 19831991 Academic Article

abstract

• We examine debenture yields over the period 1983-1991 to evaluate the market's sensitivity to bank-specific risks, and conclude that investors have rationally reflected changes in the government's policy toward absorbing private losses in the event of a bank failure. Although this evidence does not establish that market discipline can effectively control banking firms, it soundly rejects the hypothesis that investors cannot rationally differentiate among the risks undertaken by the major U.S. banking firms.

authors

• Sorescu, Sorin

published proceedings

• The Journal of Finance

author list (cited authors)

• FLANNERY, M. J., & SORESCU, S. M.

citation count

• 438

complete list of authors

• FLANNERY, MARK J||SORESCU, SORIN M

publication date

• January 1996

publisher

• Wiley  Publisher

published in

• The Journal of Finance  Journal

Digital Object Identifier (DOI)

• 10.1111/j.1540-6261.1996.tb04072.x

start page

• 1347

end page

• 1377

volume

• 51

issue

• 4

URL

• http://dx.doi.org/10.1111/j.1540-6261.1996.tb04072.x