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Military values/virtues are a subset of ethical values. The purpose of this study is to examine the effect of military virtues on job performance, either directly, or indirectly through mediation by, loyalty, patience, respect, employee engagement, job performance, military ethics, courage, self-discipline, caring, military virtue, Sri Lanka Air Force (SLAF) employee engagement.

Military virtues were conceptualized as a collective construct, consisting of loyalty, courage, patience, respect, self-discipline and caring. Using a sample of 254 military officers in the SLAF, the authors measured the effect of military virtues on job performance. The first model was a direct measurement of the influence of military virtues on job performance. The second model measured the influence of military virtues on employee engagement, followed by measurement of the influence of employee engagement on job performance. Structural equation modeling was used in data analysis.

Both direct effects and mediated effects of military virtues on job performance were significant. However, the direct effect was stronger, suggesting that military virtues in and of themselves resulted in superior performance, more effectively, than by first increasing employee engagement with the task or the organization.

This may be an initial empirical examination of the effects of military virtues on job performance.

We examine yield spreads, defined as the difference between the yield to maturity of the risky bank bond and that of a risk-free bond with similar maturity and other characteristics, after controlling for market, liquidity and tax factors. We use senior bonds issued by banks since one of the goals of the Dodd–Frank Act (DFA) is to reduce the possibility of a full-fledged bailout of banks. If markets do not believe that banks will be bailed out, senior bondholders will bear a higher exposure to default risks, and such risk perceptions will be reflected in the yield spread levels.

We use generalized method of moments (GMM) for parameter estimation with standard errors corrected for autocorrelation and heteroskedasticity using the Newey–West (1987) procedure with five lags.

Our results indicate a discount of 133 basis points in yield spreads due to the TBTF or too-big-to-fail factor prior to the DFA. However, the market charges a net premium of 36 basis points for the TBTF factor immediately after the DFA (a total change of 169 basis points). We examine commercial banks and noncommercial banks (primarily investment banks and insurance firms) separately. For commercial banks, the discounts observed prior to the DFA changes to a premium after the DFA. For investment banks, the higher premium charged prior to the DFA is reduced after the DFA.

Not all banks issue bonds and not all issued bonds trade in the secondary market frequently.

After the Great Recession, there is a sustained effort across the globe, to remove the possibility of a bailout of very large banks. With systemic risk monitoring, improved capital regulation, stress testing and other regulations on banks and other shadow banking organizations, the question of whether market perceives implicit guarantee of very large financial institutions. We have examined a new security that is not treated as capital.

If taxpayer bailouts are avoided, such resources can be used for other developmental purposes. The moral hazard problems of bank manager are also reduced.

We are the first to exclusively examine the senior bonds issued by banks around the enactment of the DFA, 2010.