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

52 Pages Posted: 16 Aug 2012 Last revised: 13 Aug 2017

Jeffrey J. Burks

University of Notre Dame

Christine Cuny

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

Joseph J. Gerakos

Tuck School of Business at Dartmouth College

Joao Granja

University of Chicago - Booth School of Business

Date Written: August 11, 2017

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 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

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

Jeffrey 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 Gerakos

Tuck School of Business at Dartmouth College ( email )

Hanover, NH 03755
United States

Joao Granja

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Room 326
Chicago, IL 60637
United States

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