Depositor Discipline and Bank Risk-Taking Behavior: Evidence from the South-East Asian Financial Crises

NFI Working Paper No. 2006-WP-13

30 Pages Posted: 14 May 2007

See all articles by M. Kabir Hassan

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

M. Ershad Hussain

University of New Orleans - College of Business Administration - Department of Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 2006

Abstract

This paper examines whether the risk-taking behavior of commercial banks in five countries of South-East Asia changed after the Asian Crises of 1997. The paper utilizes the framework created by Gruben et al (1997, 1998, and 2003). It also examines the connection between the risk-taking behavior and depositor discipline of these banks after the Asian Crises of 1997. Based on bank level data from the Bank Scope, 2005 CD, the paper presents evidence that the state of depositor discipline is very weak in the selected countries even after the Asian Crises. Evidence also shows that the risk taking behavior of commercial banks did not change much before and after the Asian Crises of 1997, and that perfect competition prevailed both before and after the Crises in the banking sector. Finally, evidence also shows that the there is no connection between risk-taking behavior and depositor discipline.

Keywords: Market discipline, Asian financial crisis, bank risk-taking, market structure

Suggested Citation

Hassan, M. Kabir and Hussain, M. Ershad, Depositor Discipline and Bank Risk-Taking Behavior: Evidence from the South-East Asian Financial Crises (November 2006). NFI Working Paper No. 2006-WP-13, Available at SSRN: https://ssrn.com/abstract=985640 or http://dx.doi.org/10.2139/ssrn.985640

M. Kabir Hassan (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

M. Ershad Hussain

University of New Orleans - College of Business Administration - Department of Economics and Finance

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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