We evolve competitive measures of market discipline, and explore their associated ramifications for banking, by way of the effects of Basel II adoption. Using principal component analysis on the data of 706 banks from 34 countries, we generate measures that are better reflective of market discipline universally than any single variable that is popularly in use – e.g., subordinated debt activity. Interestingly, some of our measures are more suited to assessing market discipline in emerging economies than in developed economies and vice-versa, and some are suited to use across both groups of economies. Importantly, using impact assessment, we find that our constructs are indeed credible proxies for the Basel II envisaged market discipline; they are variously negatively related to Basel II adoption. Furthermore, bank performance, measured by profitability and stability, also exhibit significant responsiveness to the adoption of market discipline, with, for instance, less impact on developed economy banks’ profitability than on emerging economy banks’ profitability, and decline in loan risk in emerging economy banks versus the increase in loan risk in developed economy banks (which is interestingly mitigated by stable equity cushion and higher liquidity). These and other results of our paper provide useful policy guides for several stakeholders of the banking industry.