Does Market Discipline Impact Bank Charter Value? The Case for Australia and Canada

24 Pages Posted: 12 Mar 2019

See all articles by Mamiza Haq

Mamiza Haq

University of Queensland - Finance; Financial Research Network (FIRN)

Necmi K. Avkiran

University of Queensland - Business School; Financial Research Network (FIRN)

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: March 2019

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.

Keywords: Bank charter value, Market discipline, Bank capital, Contingent liabilities, Non‐interest income, Global financial crisis

Suggested Citation

Haq, Mamiza and Avkiran, Necmi K. and Tarazi, Amine, Does Market Discipline Impact Bank Charter Value? The Case for Australia and Canada (March 2019). Accounting & Finance, Vol. 59, Issue 1, pp. 253-276, 2019, Available at SSRN: https://ssrn.com/abstract=3349308 or http://dx.doi.org/10.1111/acfi.12244

Mamiza Haq (Contact Author)

University of Queensland - Finance ( email )

Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Necmi K. Avkiran

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

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