Download This PaperCompetition and Bank Opacity
Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 05/2016
Published in The Review of Financial Studies, Volume 29, Issue 7, July 26
48 Pages Posted: 26 Apr 2016 Last revised: 26 Sep 2023
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Competition and Bank Opacity
Competition and Bank Opacity
Competition and Bank Opacity
Date Written: April 25, 2016
Abstract
This working paper was written by Liangliang Jiang (Lingnan University), Ross Levine (Haas School of Business, University of California, Berkeley) and Chen Lin (University of Hong Kong).
Did regulatory reforms that lowered barriers to competition increase or decrease the quality of information that banks disclose to the public? By integrating the gravity model of investment with the state-specific process of bank deregulation that occurred in the United States from the 1980s through the 1990s, we develop a bank-specific, time-varying measure of deregulation-induced competition. We find that an intensification of competition reduced abnormal accruals of loan loss provisions and the frequency with which banks restate financial statements. The results suggest that competition reduces bank opacity, potentially enhancing the ability of markets to monitor banks.
JEL Classification: G21, G28, G34, G38
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