Bank Opacity, Intermediation Cost and Globalization: Evidence from a Sample of Publicly Traded Banks in Asia

26 Pages Posted: 13 Oct 2013

See all articles by Wahyoe Soedarmono

Wahyoe Soedarmono

Sampoerna University - Faculty of Business

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: September 01, 2013

Abstract

This paper examines the relationship between opacity and the cost of intermediation in Asian banks. Using a sample of publicly traded commercial banks from 2002 to 2008, our empirical results show that higher opacity is associated with a lower intermediation cost in banking. Hence, bank managers in their efforts to overcome asymmetric information issues and to improve transparency tend to offset the higher cost of acquiring and disclosing information by increasing the cost of intermediation for entrepreneurs. Moreover, a deeper look at the country level indicates that the negative link between opacity and the cost of intermediation is reversed as globalization increases. Greater globalization therefore outweighs managerial entrenchment behavior to preserve bank opacity. Our findings highlight that bank opacity issues are even more costly in countries with higher globalization.

Keywords: Bank opacity, financial intermediation, globalization, Asia

JEL Classification: G21, G28

Suggested Citation

Soedarmono, Wahyoe and Tarazi, Amine, Bank Opacity, Intermediation Cost and Globalization: Evidence from a Sample of Publicly Traded Banks in Asia (September 01, 2013). Available at SSRN: https://ssrn.com/abstract=2339627 or http://dx.doi.org/10.2139/ssrn.2339627

Wahyoe Soedarmono (Contact Author)

Sampoerna University - Faculty of Business ( email )

Jl. Raya Pasar Minggu, Kav. 16
Jakarta, Pancoran 12780
Indonesia

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

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