Testing for Market Discipline in the European Banking Industry : Evidence from Subordinated Debt Issues

  title={Testing for Market Discipline in the European Banking Industry : Evidence from Subordinated Debt Issues},
  author={Andrea Sironi and andrea. sironi},
The question of whether private investors can discriminate between the risk taken by banks is empirically investigated by testing the risk sensitivity of European banks’ subordinated notes and debentures (SND) spreads. A unique dataset of spreads, ratings, accounting and market measures of bank risk is used for a sample of SND issued during the 1991-2000:Q1 period. Moody’s Bank Financial Strength (MBFS) and FitchIBCA Individual (FII) ratings, which omit the influence of government and other… CONTINUE READING
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