首页|Market discipline and the risk-taking behaviour of banks in India
Market discipline and the risk-taking behaviour of banks in India
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NSTL
Wiley
After the financial crisis, the Indian banking system has accumulated amountain of bad loans which has crippled the banking sector and halted thecredit flow to the industry. Several immediate causes for the bad loan crisishave been pointed out. However, poor market discipline, the ultimate rootcause of the bad loan crisis, has not been paid adequate attention. This studyseeks to investigate how effectively the market disciplinary forces, capturedthrough information disclosure, interbank deposits, concentration and owner-ship structure, incentivise the Indian banks to adopt prudential risk manage-ment by enhancing their risk-weighted capital ratio. The findings of the studyshow that information disclosure and interbank deposits do not induceprudential risk behaviour among banks in India. However, with increasingconcentration in the banking sector, a higher level of information disclosureeffectively induces banks to maintain higher capital ratios, but inter-bankdeposits do not have any significant effect on bank capital. We also observethat government banks maintain lower capital ratios as compared to privatebanks indicating government banks' higher expectation of government bailout.
capital ratioIndiainterbank depositsmarket disciplinenon-performing assetsprudential risk behaviour
Dilawar Ahmad Bhat、Udayan Chanda、Anil K. Bhat
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Department of Management,Birla Institute of Technology and Science, Pilani,Rajasthan,India||Institute of Business Management,GLA University,Mathura,India
Department of Management,Birla Institute of Technology and Science, Pilani,Rajasthan,India
NETL
NSTL
Wiley
