Journal of Indonesian Economy and Business
Vol 27, No 3 (2012): September

BANK RISK AND MARKET DISCIPLINE

Taswan Taswan (STIKUBANK University)
Eduardus Tandelilin (Universitas Gadjah Mada)
Suad Husnan (Universitas Gadjah Mada)
Mamduh M. Hanafi (Universitas Gadjah Mada)



Article Info

Publish Date
01 Mar 2012

Abstract

This paper investigates the issue of bank risk taking. Specifically we investigate two main issues: (1) determinants of bank risk, and (2) market discipline to the banks either in implicit, explicit guarantee systems, and all periods. Using Indonesian data, we find that domestic, foreign, and ownership concentration have positive impact on bank risk. Bank shareholders engage in entrenchment behaviour, rather than convergence behaviour. We further find that charter value and compliance to regulation have negative impact on bank risk. Next, we find that market disciplines the banks. Market disciplines the banks at thesame degree in implicit and explicit deposit guarantee systems. Our findings highlight the importance of paying close attention to banks ownership, charter value, and compliance to regulation. Furthermore, since we find that market disciplines the Banks at the same degree in explicit and implicit guarantee systems, we need to investigate this issue further.This finding highlights research potential in the future: to investigate disciplining behaviour from various types of depositors.Keywords: bank ownership, market discipline, risk, entrenchment, convergence, and deposit insurance

Copyrights © 2012






Journal Info

Abbrev

Publisher

Subject

Economics, Econometrics & Finance

Description

Journal of Indonesian Economy and Business (JIEB) is open access, peer-reviewed journal whose objectives is to publish original research papers related to the Indonesian economy and business issues. This journal is also dedicated to disseminating the published articles freely for international ...