• 「FEEL」 Shin, S., Min, H., and McDonald, J. (2014), “The Market-Discipline Effects of Subordinated Debt: Enhanced US Commercial Banking-Sector Efficiency and Stability”, Journal of Financial Risk Management, Vol. 3, No. 3, pp. 78-95.

    Lab: Financial Economics and Engineering Lab.

    Professor: Hong-Ghi Min

    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

    Journal: Journal of Financial Risk Management

    Publish: 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.

    DOI: 10.4236/jfrm.2014.33009

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