The disciplinary effect of subordinated debt on bank risk taking
نویسنده
چکیده
Article history: Received 25 May 2012 Received in revised form 2 April 2013 Accepted 26 May 2013 Available online 5 June 2013 Using data for publicly listed commercial banks and bank holding companies around the world, I investigate the disciplinary effect of subordinated debt on bank risk taking in the period 2002– 2008. In addition, I examinewhether this effect depends on national bank regulations and legal and institutional conditions. I provide evidence that subordinated debt has a mitigating effect on bank risk taking. Further, the results suggest a threshold level of national bank regulations and economic development above which subordinated debt mitigates risk taking. Overall, the evidence supports the efficacy of proposals calling for increased use of subordinated debt in banking firms. © 2013 Elsevier B.V. All rights reserved. JEL classification: G18 G21 G34
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