Abstract

http://ssrn.com/abstract=2129805
 
 

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Competition and Voluntary Disclosure: Evidence from Deregulation in the Banking Industry


Jeffrey J. Burks


University of Notre Dame

Christine Cuny


New York University (NYU) - Leonard N. Stern School of Business

Joseph Gerakos


University of Chicago - Booth School of Business

Joao Granja


Massachusetts Institute of Technology (MIT) - Sloan School of Management

April 3, 2015

Chicago Booth Research Paper No. 12-29

Abstract:     
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 and, in particular, an increase in press releases containing forward-looking, earnings-related, and capital structure-related disclosures. We further provide evidence that banks trade-off incentives to appeal to the capital markets with the incentive to deter potential competitors. Increases in voluntary disclosure are higher in local markets that have low levels of concentration prior to deregulation and are correlated with incentives to be acquired. The tone of press releases becomes less positive and more negative after entry barriers are lowered. The tone effects are stronger for private banks that likely use press releases to communicate with competitors rather than investors, which is consistent with incumbents increasing the disclosure of bad news to deter new entry.

Number of Pages in PDF File: 49


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Date posted: August 16, 2012 ; Last revised: April 4, 2015

Suggested Citation

Burks, Jeffrey J. and Cuny, Christine and Gerakos, Joseph and Granja, Joao, Competition and Voluntary Disclosure: Evidence from Deregulation in the Banking Industry (April 3, 2015). Chicago Booth Research Paper No. 12-29. Available at SSRN: http://ssrn.com/abstract=2129805 or http://dx.doi.org/10.2139/ssrn.2129805

Contact Information

Jeffrey J. Burks
University of Notre Dame ( email )
Mendoza College of Business
Notre Dame, IN 46556-5646
United States
Christine Cuny (Contact Author)
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
Ste. 10-91
New York, NY NY 10012
United States
212-998-0423 (Phone)
Joseph J. Gerakos
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Ave.
Chicago, IL 60637
United States
773-834-6882 (Phone)
Joao Granja
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
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