52 Pages Posted: 16 Aug 2012 Last revised: 13 Aug 2017
Date Written: August 11, 2017
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 an increase in press releases. Overall, press releases become more negatively toned as entry barriers decrease, particularly in states that severely restricted entry prior to the IBBEA. However, disclosures by public banks and by banks issuing equity become incrementally positively toned when entry barriers decrease. Thus, the increase in disclosure is consistent with a dominant incentive to deter entry via negative information, but a mitigating incentive to communicate positive information to investors.
Keywords: Voluntary disclosure, Competition, Banking
JEL Classification: M41, G21, D40
Suggested Citation: Suggested Citation
Burks, Jeffrey J. and Cuny, Christine and Gerakos, Joseph J. and Granja, Joao, Competition and Voluntary Disclosure: Evidence from Deregulation in the Banking Industry (August 11, 2017). Chicago Booth Research Paper No. 12-29. Available at SSRN: https://ssrn.com/abstract=2129805 or http://dx.doi.org/10.2139/ssrn.2129805
By Ray Ball