Information Disclosures, Default Risk, and Bank Value

44 Pages Posted: 4 Oct 2013 Last revised: 11 Sep 2015

See all articles by Ilknur Zer

Ilknur Zer

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: September 6, 2015

Abstract

This paper investigates the causal effects of voluntary information disclosures on a bank's expected default probability, enterprise risk, and value. I measure disclosure via a self-constructed index for the largest 80 U.S. bank holding companies for the period 1998-2011. I provide evidence that a bank's management responds to a plausibly exogenous deterioration in the supply of public information by increasing its voluntary disclosure, which in turn improves investors' assessment of the bank risk and value. This evidence suggests that disclosure may alleviate informational frictions and lead to a more efficient allocation of risk and return.

Keywords: Disclosure, probability of default, risk management, asymmetric information, corporate governance

JEL Classification: G21, G30, G32, G38, M41

Suggested Citation

Zer, Ilknur, Information Disclosures, Default Risk, and Bank Value (September 6, 2015). Available at SSRN: https://ssrn.com/abstract=2335717 or http://dx.doi.org/10.2139/ssrn.2335717

Ilknur Zer (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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