Market Discipline and City Commercial Banks’ Risk Taking

Yaling WANG, Yingzhi LIU


Since the end of 2006, commitment period of China’s joining into the WTO is over, Chinese bank industry fully opened, and market competition has become stronger. But China has an implicit deposit insurance, under this circumstances whether market discipline exists in city commercial banks has become an important question. This paper used data from 60 city commercial banks between 2003 and 2010 to analyze this issue. Study shows that before Chinese bank sector fully opened, the power of market is weak, market is unable to restrict city commercial bank’s risk effectively; in the wake of Chinese bank sector opening at the end of 2006, the power of market discipline gradually appeared, which controlled risk taking efficiently by price mechanism, but quantity discipline is always not obvious.

Key words: Market discipline; Banking sector; Risk taking


Market discipline; Banking sector; Risk taking


Ashcraft (2006). Does the Market Discipline Banks? New Evidence from the Regulatory Capital Mix. Federal Reserve Bank of New York Staff Reports.

Avery, et al. (1988). Market Discipline in Regulating Bank Risk: New Evidence from the Capital Markets. Journal of Money Credit and Banking, (20), 579-610.

Demirgüç-Kunt, Asli., & Huizinga, Harry (1999). Market Discipline and Financial Safety. Net Design World Bank Policy Research.

Bliss, & Flannery (2000). Bank Holding Companies: Monitoring Versus Influencing.

Blum (2002). Subordinated Debt, Market Discipline, and Banks’ Risk Taking. Journal of Banking & Finance, 26, 1427-1441.

Jagtiani, Julapa, & Lemieux, Catharine (2001). Market Discipline Prior to Bank Failure. Journal of Economics and Business, 53, 313-324.



  • There are currently no refbacks.

Copyright (c)

Share us to:   


  • How to do online submission to another Journal?
  • If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:

1. Register yourself in Journal B as an Author

  • Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.

2. Submission

  • Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.

We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:;;

 Articles published in Management Science and Engineering are licensed under Creative Commons Attribution 4.0 (CC-BY).


Address:1020 Bouvier Street, Suite 400, Quebec City, Quebec, G2K 0K9, Canada.

Telephone: 1-514-558 6138
Http:// Http://

Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures