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The Impact of Market Discipline on Banks’ Capital Adequacy: Evidence From an Emerging Economy

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dc.contributor.author Ayesha Afzal
dc.date.accessioned 2017-07-20T06:05:05Z
dc.date.available 2017-07-20T06:05:05Z
dc.date.issued 2015
dc.identifier.uri http://hdl.handle.net/123456789/15708
dc.description PP.15; ill en_US
dc.description.abstract This study presents empirical support for the role of market discipline in augmenting bank capital ratios in a competitive banking environment. Using a panel dataset on domestic commercial banks in Pakistan from 2009 to 2014, the study determines if the market penalized banks for any increase in their risk profile through a rise in the cost of raising funds. The results point to a significant relationship between capital adequacy and other risk factors, with the cost of deposits demonstrating how depositors align the required return to the perceived risk level of the bank. These findings have important implications for policymakers as market discipline could complement the role of regulators, which would eventually lower the cost of supervision. Moreover, the focus of international reforms as seen through the implementation of Basel III should continue to be on developing a more competitive and transparent banking system. en_US
dc.language.iso en en_US
dc.publisher © Lahore School of Economics en_US
dc.relation.ispartofseries Vol.4;No.1
dc.subject Basel Norms en_US
dc.subject Capital Adequacy Ratio en_US
dc.subject Market Discipline en_US
dc.title The Impact of Market Discipline on Banks’ Capital Adequacy: Evidence From an Emerging Economy en_US
dc.type Article en_US


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