Comparing Market and Supervisory Assessments of Bank Performance: Who Knows What When?
Journal of Money, Credit and Banking, Vol. 32, No. 3, Part II, August 2000, What Should Central Banks Do?: A conference sponsored by the Federal Reserve Bank of Cleveland, ed. Joseph G. Haubrich, October 27-29, 1999
Posted: 11 Jul 2000
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: Suggested Citation