Bank Disclosure and Market Assessment of Financial Fragility: Evidence from Turkish Banks' Equity Prices
Maria Fabiana Penas
Tilburg Law and Economics Center (TILEC)
VU University Amsterdam - Faculty of Economics and Business Administration
September 24, 2009
In this paper we explore whether Turkish banks with worsening indicators of financial fragility were subject to market monitoring during the years leading to the 2000/2001 crisis, and how the quality and timeliness of the disclosure affect market reaction. We find that shareholders reacted negatively to indicators of financial fragility such as increases in maturity mismatches, currency mismatches, and non-performing loans, showing shareholders’ concerns about the impact of financial fragility indicators on future profits. We also find that audited statements that show larger reporting lags, are not informative, pointing to the need of improving their timeliness. Finally, our study suggests that the finding that securities prices react to financial fragility indicators should not be taken as sufficient evidence of banks’ safety and soundness.
Number of Pages in PDF File: 32
Keywords: market discipline, event studies, financial fragility, maturity mismatch, bank disclosure
JEL Classification: G14, G21, G28, H63, M41working papers series
Date posted: March 9, 2008 ; Last revised: October 8, 2009
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