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This paper analyzes the influence of market discipline on the risk-taking incentives of banks. It is shown that market discipline reduces risk if banks can credibly commit to a given level of risk before the interest rate on deposits is set. If, however, the bank can readjust the level of risk...
Persistent link: https://www.econbiz.de/10011398285
Persistent link: https://www.econbiz.de/10001558218
This paper analyzes the influence of market discipline on the risk-taking incentives of banks. It is shown that market discipline reduces risk if banks can credibly commit to a given level of risk before the interest rate on deposits is set. If, however, the bank can readjust the level of risk...
Persistent link: https://www.econbiz.de/10011430018
Persistent link: https://www.econbiz.de/10001688521