Market discipline and ownership structure: a comparison between Brazil and the US

• Grant number: 09/11050-3
• Support Opportunities: Scholarships abroad - Research
• Start date: September 14, 2009
• End date: January 13, 2010
• Field of knowledge: Applied Social Sciences - Administration - Business Administration
• Principal Investigator: Raquel de Freitas Oliveira
• Grantee: Raquel de Freitas Oliveira
• Host Investigator: Franklin Allen
• Host Institution: Centro Universitário Álvares Penteado. Fundação Escola de Comércio Álvares Penteado (FECAP). São Paulo , SP, Brazil
• Institution abroad: University of Pennsylvania, United States

Abstract

Safe banking system is an important factor to economic and financial stability, which is the reason why it is necessary to develop tools to diminish the probability of crisis. In this context, safety nets and risk-based capital requirements have been created. Since the 1990s, there have been growing discussions on a complementary mechanism to enhance the soundness of the financial system, called market discipline: the influence investors may exert on banks, encouraging them to behave in a manner consistent with their solvency. The main goal of this research proposal is to empirically examine whether (and how) depositors respond to bank risk in Brazil and in the US, in two different periods of time, before and during the financial crises that started in 2007. In addition, the virtual influence of ownership structure and control on depositors sensitivity to risk will be explored. The sample will consist of data on Brazilian and American banks, from 1999 to 2008. (AU)