Bank quality, loan demand and market discipline
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Date
2014-12-10
Authors
Önder, Z.
Özyıldırım, S.
Editor(s)
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Emerging Markets Finance and Trade
Print ISSN
1540-496X
Electronic ISSN
1558-0938
Publisher
Routledge
Volume
50
Issue
4
Pages
61 - 72
Language
English
Type
Journal Title
Journal ISSN
Volume Title
Series
Abstract
In this paper, we examine the disciplinary role of borrowers, who are one of the key stakeholders in Turkish banks and are heavily affected when their banks experience difficulty. In the theoretical model, we show that borrowers prefer to have a relationship with less risky banks although it increases their cost of getting funds. Empirically, we examine the relationship between quality of a bank and its loan demand and find that as riskiness of a bank decreases, its loan demand increases significantly, suggesting the disciplinary role of borrowers in Turkey.