Information Effects of the Basel Bank Capital and Risk Pillar 3 Disclosures on Equity Analyst Research – An Exploratory Examination

30 Pages Posted: 8 Oct 2015

See all articles by Alexandra Niessen-Ruenzi

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance

Jerry T. Parwada

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

Stefan Ruenzi

University of Mannheim - Department of International Finance

Date Written: August 10, 2015

Abstract

An important component of the Basel Committee on Banking Supervision's framework of capital measurement and capital standards is the public disclosure of regulatory information (referred to as “Pillar 3” within the framework). The standard sets minimum requirements for the public disclosure of information on banks’ risk profile, risk management, capital adequacy, capital instruments and remuneration practices so as to contribute to the transparency of financial markets and to enhance market discipline. We find that capital and risk reporting to the market under Pillar 3 of the Basel II and Basel III accords alters the informational advantage of bank equity analysts. After the commencement of Pillar 3 reporting in Australia, equity research analysts seem to have gained access to value relevant information that was hitherto only the preserve of banks and regulators. We also find that forecast accuracy improves. However, market reaction to forecasts diminishes.

JEL Classification: G14, G18, G21, G28

Suggested Citation

Niessen-Ruenzi, Alexandra and Parwada, Jerry T. and Ruenzi, Stefan, Information Effects of the Basel Bank Capital and Risk Pillar 3 Disclosures on Equity Analyst Research – An Exploratory Examination (August 10, 2015). CIFR Paper No. 70/2015. Available at SSRN: https://ssrn.com/abstract=2670418 or http://dx.doi.org/10.2139/ssrn.2670418

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

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

Stefan Ruenzi

University of Mannheim - Department of International Finance ( email )

L9, 1-2
Mannheim, 68131
Germany

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