Abstract
ABSTRACT This paper integrates two crucial aspects of the financial safety net into a unified framework: explicit clarification of insurance coverage and a no-bailout event in China. Employing the Difference-in-Difference (DID) methodology, we illustrate that both events exert a more pronounced reinforcing effect on the market discipline of regional banks compared to national counterparts. Further investigation unveils that deposit insurance imposes a broader impact on regional banks than the no-bailout event. Additionally, both events exert a more lasting effect on market discipline compared to market-level shocks that are unrelated to implicit guarantees or merely represent a transient enhancement of financial support.
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