Competition and Voluntary Disclosure: Evidence from Deregulation in the Banking Industry
Jeffrey J. Burks
University of Notre Dame
New York University (NYU) - Leonard N. Stern School of Business
University of Chicago - Booth School of Business
Massachusetts Institute of Technology (MIT) - Sloan School of Management
December 11, 2015
Chicago Booth Research Paper No. 12-29
We use the relaxation of interstate branching restrictions under the Interstate Banking and Branching Efficiency Act (IBBEA) to examine how increases in competition affect incumbents' voluntary disclosure choices. States implemented the IBBEA over several years and to varying degrees, allowing us to identify the effect of increased competition on the voluntary disclosure decisions of both public and private banks. We find that increases in competition are associated with increases in the level of voluntary disclosure. Specifically, we find an overall increase in press releases. Consistent with heightened incentives to communicate with investors, customers, and regulators, we document an increase in press releases containing forward-looking, product- related, and capital structure-related disclosures. We find that the tone of press releases becomes more negative after entry barriers are lowered, which supports the prediction that incumbents increase the disclosure of bad news to deter entry. The negative tone effect is stronger for private banks that likely use press releases to communicate with competitors rather than investors.
Number of Pages in PDF File: 41
Keywords: Voluntary disclosure, Competition, Banking
JEL Classification: M41, G21, D40
Date posted: August 16, 2012 ; Last revised: December 21, 2015
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