Article citationsMore>>

Raviv, A., & Hilscher, J. (2011). Bank Stability and Market Discipline: Debt-for-Equity Swap versus Subordinated Notes. Working Paper, Waltham: International Business School, Brandeis University.

has been cited by the following article:

• TITLE: The Market-Discipline Effects of Subordinated Debt: Enhanced US Commercial Banking-Sector Efficiency and Stability

  AUTHORS: Sang-Ook Shin, Hong-Ghi Min, Judith A. McDonald

  KEYWORDS: Subordinated Debt, Market Discipline, Banking-Sector’s Efficiency, Stability, Non-Performing Loans, US Commercial Banks

  JOURNAL NAME: Journal of Financial Risk Management, Vol.3 No.3, September 10, 2014

  ABSTRACT: Using US commercial bank data over the period 2000 to 2008, we examine how the issuance of subordinated debt (SND) affects bank risk-taking and stability, efficiency, and deposit and loan growth rates. We identify the channels by which these effects occur and, using fixed- and random-effects models and system-GMM estimations, we provide evidence that supports these channels. As SND as a percentage of total liabilities rises, bank risk-taking falls. SNDs not only improve banks’ market discipline by directly reducing non-performing loans, but by leading to reduced overhead costs, and SNDs also boost banks’ efficiency and stability. Our results are robust under different model specifications and estimation methodologies.