Comparing Market and Supervisory Assessments of Bank Performance: Who Knows What When?

Posted: 11 Jul 2000

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business

Sally M. Davies

Board of Governors of the Federal Reserve System

Mark J. Flannery

University of Florida - Department of Finance, Insurance and Real Estate

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Abstract

We compare the timeliness and accuracy of government supervisors versus market participants in assessing the condition of large U.S. bank holding companies. We find that supervisors and bond rating agencies both have some prior information that is useful to the other. In contrast, supervisory assessments and equity market indicators are not strongly interrelated. We also find that supervisory assessments are much less accurate overall than both bond and equity market assessments in predicting future changes in performance, but supervisors may be more accurate when inspections are recent. To some extent, these results may reflect differing incentives of the parties.

JEL Classification: G21, G28, G38, E58

Suggested Citation

Berger, Allen N. and Davies, Sally M. and Flannery, Mark Jeffrey, Comparing Market and Supervisory Assessments of Bank Performance: Who Knows What When?. Available at SSRN: https://ssrn.com/abstract=227848

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1014 Greene St.
Columbia, SC 29208
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Sally M. Davies

Board of Governors of the Federal Reserve System ( email )

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202-452-6424 (Fax)

Mark Jeffrey Flannery

University of Florida - Department of Finance, Insurance and Real Estate ( email )

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Gainesville, FL 32611
United States
352-392-3184 (Phone)
352-392-0103 (Fax)

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