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Subordinate debt, deposit insurance and market oriented monitoring of banks

dc.contributor.authorChauhan G.S.
dc.contributor.authorSundaram S.S.
dc.date.accessioned2022-02-11T10:16:40Z
dc.date.available2022-02-11T10:16:40Z
dc.date.issued2016
dc.identifier.citationChauhan, G. S., & Sundaram, S. S. (2016). Subordinate debt, deposit insurance and market oriented monitoring of banks. IIMB Management Review, 28(3). https://doi.org/10.1016/j.iimb.2016.06.002
dc.identifier.issn9703896
dc.identifier.urihttps://www.doi.org/10.1016/j.iimb.2016.06.002
dc.identifier.urihttp://hdl.handle.net/11718/25391
dc.description.abstractWe present a model of a bank with endogenous risk choices, where delegated monitoring by an active market in subordinate debt helps in containing the bank's risk shifting in the presence of deposit insurance. In comparison to static ex ante contracting, an active market enables continuous monitoring by subordinate debt to penalise the bank's risk shifting. The model is instrumental in deriving optimal level of subordinate debt required to achieve equilibrium where banks choose risk levels consistent with the first best as envisaged by a social planner. The optimal quantity of subordinate debt further eliminates any risk shifting associated even with risk insensitive premiums. � 2016
dc.language.isoen_US
dc.publisherElsevier Ltd
dc.relation.ispartofIIMB Management Review
dc.subjectDeposit insurance
dc.subjectMarket discipline
dc.subjectRisk monitoring
dc.subjectRisk shifting
dc.subjectSubordinate debt
dc.titleSubordinate debt, deposit insurance and market oriented monitoring of banks
dc.typeArticle
dc.rights.licenseCC BY-NC-ND
dc.contributor.affiliationFinance and Accounting Area, Indian Institute of Management Indore, Rau-Pithampur Road, Indore, Madhya Pradesh, India
dc.contributor.affiliationErnst & Young (India) and Fellow, Indian Institute of Management Ahmedabad, Ahmedabad, India
dc.contributor.institutionauthorChauhan, G.S., Finance and Accounting Area, Indian Institute of Management Indore, Rau-Pithampur Road, Indore, Madhya Pradesh, India
dc.contributor.institutionauthorSundaram, S.S., Ernst & Young (India) and Fellow, Indian Institute of Management Ahmedabad, Ahmedabad, India
dc.description.scopusid57189043050
dc.description.scopusid55632777600
dc.identifier.doi10.1016/j.iimb.2016.06.002
dc.identifier.endpage146
dc.identifier.startpage136
dc.identifier.issue3
dc.identifier.volume28


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