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Deposit Insurance, Moral Hazard and Market Discipline: Evidence from Central and Eastern European Banks (Kouassi T., Distinguin I., Tarazi A.)

Deposit Insurance Risk-taking and Risk Management

Abstract There is a considerable debate on the role played by deposit insurance on market discipline in the banking industry. Using data for 203 banks across 10 Central and Eastern European countries, this paper empirically analyzes the implications of the implementation of formal deposit insurance for bank risk taking and market discipline. We show that the introduction of formal deposit insurance in the 90s has lead to higher risk-taking incentives. However, we also show that formal deposit insurance has strengthened market discipline. Moreover, we find that bank ownership (foreign vs domestic) and resolution strategies adopted when the country has experienced banking crises impact the effectiveness of market discipline.
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Libref/ Kouassi T., Distinguin I., Tarazi A. (2011) "Deposit Insurance, Moral Hazard and Market Discipline: Evidence from Central and Eastern European Banks", pp. 1 - 35
© Программирование — Александр Красильников, 2008
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