Standby letters of credit and bank capital: Evidence of market discipline

Market discipline, if it exists and is important, should link bank decisions together and have an impact on the way decisions are made. The relationship between the issuance of standby letters of credit and primary capital is modeled in the context of market discipline and then estimated. The hypoth...

Full description

Saved in:
Bibliographic Details
Published inJournal of banking & finance Vol. 18; no. 3; pp. 553 - 573
Main Authors Koppenhaver, G.D., Stover, Roger D.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.05.1994
Elsevier
North-Holland Pub. Co
Elsevier Sequoia S.A
SeriesJournal of Banking & Finance
Subjects
Banking industry
Capital
Economic models
Efficient markets
Equity capital
Letters of credit
Market discipline
Standby letters
Statistical analysis
Studies
United States > US
Market discipline
Standby letters
Capital
G21
Online AccessGet full text

Cover

More Information
Summary:Market discipline, if it exists and is important, should link bank decisions together and have an impact on the way decisions are made. The relationship between the issuance of standby letters of credit and primary capital is modeled in the context of market discipline and then estimated. The hypothesis that market discipline causes a joint relationship between bank capital and standby letter of credit decisions for banks that are active participants in the standby market or that rely heavily on purchased funds is tested and cannot be rejected.
ISSN:0378-4266
1872-6372
DOI:10.1016/0378-4266(94)90009-4