Does market discipline impact bank charter value? The case for Australia and Canada. (13th October 2016)

• Record Type: Journal Article
• Authors: Haq, Mamiza; Avkiran, Necmi K.; Tarazi, Amine
• Editors: Smith, Tom
• Is Part Of: Accounting and finance. Volume 59:Number 1(2019)
• Page Start: 253
• Page End: 276
• Publication Date: 2016-10-13
• Subjects: Bank charter value -- Market discipline -- Bank capital -- Contingent liabilities -- Non‐interest income -- Global financial crisis; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12244
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: This study analyses the relation between market discipline and bank charter value using a panel data set of publicly listed domestic banks in Australia and Canada over the period of 1995–2011, with a focus on the 2007–2008 global financial crisis (GFC). Overall, the results show a positive relation between market discipline and bank charter value, but this relation is weaker in the post‐GFC period. 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 stability. The results are robust to several model specifications.