Browsing by Subject "Market discipline"
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Item Open Access Depositors' assessment of bank riskiness in the Russian Federation(Springer, 2008) Ungan, E.; Caner, S.; Özyıldırım, S.In the period after the crises in the late 1990s, the banking industries in most emerging markets have undergone significant restructuring consistent with the Basel II Accord. The Central Bank of Russia's efforts since 2000 have contributed to the consolidation and improvement of the banking industry. To measure the extent of market discipline in the Russian banking industry, we study the reaction of Russian depositors to excessive risk taking by large banks between 2000:1 and 2005:1. We find that during our analysis period, well-capitalized, more liquid banks significantly increase their deposits.Item Open Access How sensitive are bank managers to shareholder value?(Springer New York, 2012) Caner, S.; Özyıldırım, S.; Ungan, A. E.We test for the existence of market discipline by shareholders of banks with a wide range of ownership structures. Discipline by shareholders manifests itself through monitoring banks' level of risk as well as through influencing banks' management actions. We find that shareholders utilize the relation between stock returns and different types of risk measures to monitor risky banks. Shareholders partially influence bank management by responding to decreasing stock returns with a demand to improve loan quality. Moreover, the influence on management in small banks is more pronounced compared to large banks.Item Open Access Market reaction to risky banks: did generous deposit guarantee change it?(Pergamon Press, 2008) Önder, Z.; Özyildirim, S.Turkey experienced a massive banking crisis in February 2001, resulting in the loss of more than a thousand managerial jobs and the closure of 21% of all bank branches in the market. In this paper, we study the behavior of the market and the banks in Turkey before the crisis, from 1988 to 2000, which includes the period of full deposit insurance. The empirical results showed that not only depositors but also borrowers reacted negatively to risky banks and punished them even more during the period of generous government guarantee. However, in the same period, banks were found to increase their moral hazard behavior significantly. Although the International Monetary Fund and the World Bank recommend explicit deposit insurance for developing countries, the findings of this paper suggest that deposit insurance may not be an effective policy tool to improve market confidence, and it does not guarantee a stable economic environment even when the market reacts negatively to the moral hazard behavior of banks.Item Open Access What do depositors know about risk?(Izdatel'skii Dom Natsional'nogo Issledovatel'skogo Universiteta "Vysshaya Shkola Ekonomiki", 2013) Caner, S.; Özyıldırım, S.; Ungan, A. E.The limited success of bank supervision can be better understood by taking into consideration the country conditions and market-based measures that are effective in constraining bank risk. In the case of Russian Federation and Turkey, regulators' incentive to oversight can be further complicated and hence, it can be argued that depositors compel to select sound banks if they continue to fund intermediation by banks in two countries. In this paper, depositors' sensitivity to risk using change in deposits and the level of interest rates on deposits are tested to understand whether they can effectively limit risk-taking behavior of banks. Comparing depositors' reaction in two countries, we find differentiated reaction by depositors to bank risks. In the Russian Federation, it seems that depositors respond weakly to increased bank risks only with the possibility of withdrawing funds. However, in Turkey depositors exercise both quantity and price discipline on the banks which facilitates in identifying risky banks. Moreover, market development, effectiveness of supervisory agencies, types of banks and types of depositors are found to affect depositors' reaction against banks. The findings of this study suggest that the experiences of depositors in both countries seem to play important role in reliance to market discipline in the future.