Bank Opacity and Information Asymmetry around Quarterly Earnings Announcements

Posted: 30 Mar 2013 Last revised: 28 Oct 2014

See all articles by Tanvir Ansari

Tanvir Ansari

Queensland University of Technology - School of Economics and Finance

Date Written: October 4, 2013

Abstract

The goal of achieving transparency has become more challenging in recent years as banks’ activities have become increasingly more complex and dynamic, making it harder for outsiders to comprehend the full extent of banks’ exposures. In this study, we examine various on- and off-balance sheet activities that are thought to be responsible for increased bank opacity, where the latter is proxy by the bid-ask spread and analysts’ surprise dispersion. Using a sample of 275 U.S. commercial banks listed on the NASDAQ/NYSE/AMEX from Q4-1999 to Q2-2012, our findings support the argument that off-balance sheet trading activities, in particular foreign exchange rate and equity derivatives, are a significant source of bank opacity. This is followed by securitization (of family residential loans), troubled loans (FDIC Texas ratio), and secured loans.

Keywords: bank opacity, commercial banks, information asymmetry, off-balance sheet activities, securitization, transparency

JEL Classification: G21, G14

Suggested Citation

Ansari, Tanvir, Bank Opacity and Information Asymmetry around Quarterly Earnings Announcements (October 4, 2013). Available at SSRN: https://ssrn.com/abstract=2241001 or http://dx.doi.org/10.2139/ssrn.2241001

Tanvir Ansari (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

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