Bank Management and Market Discipline

36 Pages Posted: 11 Nov 2008

See all articles by Yoram Landskroner

Yoram Landskroner

Hebrew University of Jerusalem - Department of Finance and Banking; New York University (NYU) - Leonard N. Stern School of Business

Jacob Paroush

Bar-Ilan University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2003

Abstract

In recent years market discipline attracted interest as a mechanism to augment or to partially replace government oversight (discipline) of the financial sector, specifically depository institutions. Despite the abundance of research, mostly empirical studies, in the area no formal model has been presented to analyze the different aspects of the issue. This paper attempts to fill this gap. In our model we incorporate the characteristics of the regulatory structure and market discipline and examine the effects of several parameters on the optimal decisions of the bank. For example we consider the effects of changes in risk, deposit insurance coverage, and degree of market discipline. In most cases our results are compatible with recent empirical findings.

Suggested Citation

Landskroner, Yoram and Paroush, Jacob, Bank Management and Market Discipline (October 2003). NYU Working Paper No. 2451/27264, Available at SSRN: https://ssrn.com/abstract=1299479

Yoram Landskroner (Contact Author)

Hebrew University of Jerusalem - Department of Finance and Banking ( email )

Mount Scopus
Jerusalem, 91905
Israel

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Jacob Paroush

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972.3.531.8569 (Phone)
+972.3.535.3180 (Fax)

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