Market discipline in banking: evidence from Thailand during the 1997 crisis

This article investigates the impact of banking crisis on deposit market discipline using evidence from Thailand. The empirical evidence suggests that depositors' responsiveness to bank risk taking increases in the aftermath of the crisis. However, an explicit blanket guarantee provided by the government since the 1997 crisis weakens the extent of an increase in market discipline during the post-crisis period. The results have relevant implications on the implementation of an explicit deposit insurance scheme for Thailand.