Information Disclosures, Default Risk, and Bank Value

45 Pages Posted: 18 Nov 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: 2015-11-17

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, default probability, firm value, risk management, asymmetric information, corporate governance

Suggested Citation

Zer, Ilknur, Information Disclosures, Default Risk, and Bank Value (2015-11-17). FEDS Working Paper No. 2015-104, Available at SSRN: https://ssrn.com/abstract=2692456 or http://dx.doi.org/10.17016/FEDS.2015.104

Ilknur Zer (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

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