Consequences of Mandated Bank Liquidity Disclosures

62 Pages Posted: 25 Feb 2016 Last revised: 29 Aug 2018

See all articles by Anya Kleymenova

Anya Kleymenova

Board of Governors of the Federal Reserve System

Date Written: August 28, 2018

Abstract

This paper examines the capital market consequences of mandatory disclosures of banks’ liquidity and the resulting changes in banks’ behavior. Employing a hand-collected sample of the disclosures of banks borrowing from the US Federal Reserve Discount Window (DW), I find that these disclosures contain positive incremental market information and decrease banks’ cost of capital. However, I also find evidence of endogenous costs associated with more disclosure as banks respond by increasing liquidity holdings and decreasing risky assets. Following the disclosures, affected banks avoid accessing the DW facility, consistent with the presence of the DW stigma.

Keywords: Liquidity disclosure, discount window, consequences of disclosure, bank liquidity, prudential regulation of banks, real effects

JEL Classification: G18, G21, G28, M41

Suggested Citation

Kleymenova, Anya V., Consequences of Mandated Bank Liquidity Disclosures (August 28, 2018). Chicago Booth Research Paper No. 16-04, Available at SSRN: https://ssrn.com/abstract=2737499 or http://dx.doi.org/10.2139/ssrn.2737499

Anya V. Kleymenova (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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