The importance of market discipline has been rapidly growing at both the regulatory and market levels in recent decades. However, firm/system-wide financial failures during the global financial crisis supported the idea of more... more
The importance of market discipline has been rapidly growing at both the regulatory and market levels in recent decades. However, firm/system-wide financial failures during the global financial crisis supported the idea of more regulation. The result has been in the author's view, excessive or over-regulation at the expense of market discipline and its proven insights. This paper asks whether market discipline could provide an effective tool for firm/system-wide risk management. As an extension of the existing market discipline literature , the paper also attempts to analyse connections between market discipline, disclosure and management of custody risks.
