Abstract

http://ssrn.com/abstract=2089745
 


 



Has Market Discipline on Banks Improved after the Dodd - Frank Act?


Bhanu Balasubramanian


University of Akron - College of Business Administration - Department of Finance

Ken B. Cyree


University of Mississippi - School of Business Administration

June 8, 2012


Abstract:     
We investigate whether or not market discipline on banking firms changed after the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) of 2010. If market discipline is improved, we should see a lower discount for size on yield spreads, particularly for larger banks. Using secondary market subordinated debt transactions we find that the DFA has been effective in reducing, but not in eliminating the too-big-to-fail (TBTF) effect on yield spreads. We find that the yield spread for the 19 TBTF banks increased by 155 basis points, but these banks still have yield spreads 61 basis points lower than a non-TBTF bank.

Number of Pages in PDF File: 47

Keywords: Dodd - Frank Act, market discipline, default risk, yield spread, financial crisis

JEL Classification: G01, G20, G21, G28

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Date posted: June 24, 2012  

Suggested Citation

Balasubramanian, Bhanu and Cyree, Ken B., Has Market Discipline on Banks Improved after the Dodd - Frank Act? (June 8, 2012). Available at SSRN: http://ssrn.com/abstract=2089745 or http://dx.doi.org/10.2139/ssrn.2089745

Contact Information

Bhanu Balasubramanian (Contact Author)
University of Akron - College of Business Administration - Department of Finance ( email )
259 S. Broadway
Akron, OH 44325
United States
Ken B. Cyree
University of Mississippi - School of Business Administration ( email )
PO Box 3986
Oxford, MS 38677
United States
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