The Empirical Study Of Market Discipline In China's Listed Banks

Market discipline is one of the three Pillars in the new Basel Accord in order to strengthen the banking supervision,which is also the means and goals to establish a modern banking regulation system in China.Nowadays the world banking stability was seriously crushed by global financial crisis and domestic banking reform is being the critical stage.Under such background,doing empirical research of market discipline in China's listed banks has rich meanings to guide the reform and regulation of domestic banksFrom the beginning of the thesis,the related documents at home and abroad were summarized,especially for the paper about empirical research,then give a clear definition of market discipline in banking.A framework was proposed to analysis the mechanism of market discipline from three parts - shareholders,depositors and subordinate debt(SND) holders.Then a theoretical model was introduced.In the part of empirical research,the fixed effect model of unbalanced panel data was used.14 China's listed banks were taken as samples.The time of the dataset was between the first quarter of 2004 to the third quarter of 2008.We use distance to default,true interest rate and SND's credit spread which were driven from the market data and financial reports as the measures of market discipline.Then we test the relevance between these measures and the accounting risk indicators.The results show that the power of market discipline become weaker and weaker from shareholders to subordinate debt holders;market discipline was mainly reflected in the way of market supervision;the effect of implicit deposit insurance is becoming stronger from joint-stock banks to city commercial banks.Finally,the paper gave some recommendations on how to strengthen the mechanism of market discipline.