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Korean Journal of Financial Studies 2012;41(4):521-546.
Published online September 30, 2012.
The Effect of Regulatory PCA and Disclosure Frequency on Depositors` Market Discipline in Korean Savings Banks
Hyo Soon Choi
저축은행 시정조치 및 공시주기의 시장규율 영향
The bank regulators` actions for failing banks and financial information disclosed by those banks may be important sources for bank depositors to measure the possibility of bank failures. This paper examines whether the strength of depositors` market discipline is affected by the enforcement or forbearance of Prompt Corrective Actions, and by the difference in financial disclosure frequency. Using a panel of about 2,229 bank-semi-year data during 2001~2010 for Korean savings banks I find some empirical evidences as follows; First, uninsured deposit portion is sensitive to the bank risk measured by NPL ratio, BIS capital ratio, and ROA. Second, the enforcement of PCA increase the depositors` sensitivity while regulatory forbearance reduce the sensitivity. Third, depositors` sensitivity to the change of bank risk level is smaller for quarterly disclosing banks than semi-annually disclosing banks. Fourth, the degree of enhancement of sensitivity caused by the PCA enforcement is low for quarterly disclosing banks. Findings suggest that reinforcing disclosure and strong enforcement policy might increase the effectiveness of market discipline.
Key Words: Savings Bank,Regulatory Forbearance,Prompt Corrective Action,Market Discipline,Disclosure Frequency,적기시정조치,저축은행,시장규율,공시 주기,감독 유예
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