The Impact of Pillar 3 Disclosures on Asymmetric Information and Liquidity in Bank Stocks: Multi-Country Evidence

27 Pages Posted: 10 Oct 2015

See all articles by Jerry T. Parwada

Jerry T. Parwada

UNSW Australia Business School, School of Banking and Finance; UNSW Business School; Financial Research Network (FIRN)

Kathryn Lau

University of New South Wales (UNSW)

Stefan Ruenzi

University of Mannheim - Department of International Finance

Date Written: August 10, 2015

Abstract

Theory suggests that increasing the public availability of regulatory information may hurt the information environment of bank stocks. It is therefore not clear whether the Basel Accord’s intent to foster market discipline by requiring banks to publish information on their risk management practices and exposures is beneficial. Using a sample of the 54 largest banks in Australia, Canada, India, Singapore, South Africa and UK, we find that, with the exception of South Africa and Singapore, there is a reduction in time-waited bid-ask spreads post the implementation of Pillar 3 reporting. The preliminary evidence suggests that increasing the availability of hitherto private information on risk management practices is welfare enhancing.

Suggested Citation

Parwada, Jerry T. and Lau, Kathryn and Ruenzi, Stefan, The Impact of Pillar 3 Disclosures on Asymmetric Information and Liquidity in Bank Stocks: Multi-Country Evidence (August 10, 2015). CIFR Paper No. 82/2015. Available at SSRN: https://ssrn.com/abstract=2670403 or http://dx.doi.org/10.2139/ssrn.2670403

Jerry T. Parwada (Contact Author)

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

UNSW
Sydney, NSW 2052
Australia

HOME PAGE: http://www.firn.org.au

Kathryn Lau

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

Stefan Ruenzi

University of Mannheim - Department of International Finance ( email )

L9, 1-2
Mannheim, 68131
Germany

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