Bank asset allocation: the effectiveness of market monitoring

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to study the effectiveness of market discipline on banks' risk-taking behavior based on how swiftly banks respond to market information. Design/methodology/approach -A simplified incentive model provides the necessary justification for two types of market disciplines: first, monitoring by uninsured market participants, and second, risk premium in terms of interest spread required by risk-averse depositors. Panel data regression is carried out for both surviving and failed US banks for the period 1999:Q4-2007:Q3 to examine the role of market discipline, bank capital, and macroeconomic shocks. Findings -The paper finds that banks which failed during 2007:Q4-2010:Q4 suffered from fundamental weaknesses in their asset quality relative to the surviving banks prior to the crisis. Originality/value -The paper focusses on two questions: In what circumstance does market monitoring exist? And how can market incentives affect banking firms' actions? The first question is studied in a simplified incentive model that provides justification for two types of market discipline. Given that, the effectiveness of market discipline is empirically tested, using the US banking data in the period leading up to a surge in the number of bank failures in 2007-2010. The paper's results show that failed institutions with large size were relatively less responsive to early warning signals of declining uninsured deposits and rising deposit spread.

The Physiological Change of <i>Eupatorium denophorum</i> Spreng under Pb Stress

“…Eupatorium adenophorum Spreng native in Central America, mainly in Mexico is a toxic weed which causes damage of many farmlands, pasture fields and forests due to its strong allelopathy which inhibits growth of other plants with a strong ability to adapt to different environmental conditions [3][4]. According to reported the absorbability migration abilities to Pb, Zn and Cr of Eupatorium adenophorum Spreng were very strong [5][6]. But, absorption and accumulation of heavy metals of Eupatorium adenophorum Spreng are link closely with their growth situation.…”