53 Pages Posted: 16 Aug 2012 Last revised: 16 Nov 2016
Date Written: November 15, 2016
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 become incrementally positively toned around stock issuances when entry barriers decrease. Thus, the increase in disclosure is consistent with heightened incentives to communicate positive information to investors and negative information to potential competitors.
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 (November 15, 2016). 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