Information Disclosure, Bank Performance and Bank Stability

Int. J. Banking, Accounting and Finance, Vol. 5, No. 4, 2014

39 Pages Posted: 25 Nov 2016

See all articles by Perihan Iren

Perihan Iren

Zayed University

Alan K. Reichert

Cleveland State University

Dieter Gramlich

Baden-Wuerttemberg Cooperative State University Mosbach (DHBW)

Date Written: 2014

Abstract

The purpose of this research is to identify the effects of information disclosure on commercial bank performance and stability. Specifically, the study examines the relationship between different levels of information disclosure and the subsequent impact on various measures of bank return and risk. The focus is on securitised assets and credit derivative activities, both of which were at the heart of the sub-prime mortgage crisis of 2008. Using a sample of 27 US bank holding companies (BHCs) for the period from June 2001 to December 2008, a significant relationship between the quantity and quality of information disclosure and bank performance and stability is observed. A ‘switching’ behaviour is identified, whereby performance and stability initially decrease and then improve when additional information on a bank’s securitisation and credit derivative activities are disclosed. This switching effect is possibly explained by economies-of-scale and a ‘learning curve’ effect. The results provide guidance for managing both the volume and quality of information disclosed by both bank managers and the regulatory authorities.

Keywords: information disclosure, transparency, banking disclosure, bank performance, bank stability, securitisation, credit derivatives, financial crisis

JEL Classification: G01, G21

Suggested Citation

Iren, Perihan and Reichert, Alan K. and Gramlich, Dieter, Information Disclosure, Bank Performance and Bank Stability (2014). Int. J. Banking, Accounting and Finance, Vol. 5, No. 4, 2014. Available at SSRN: https://ssrn.com/abstract=2874144

Perihan Iren (Contact Author)

Zayed University ( email )

P.O. Box 4783
Abu Dhabi
United Arab Emirates

Alan K. Reichert

Cleveland State University ( email )

Cleveland, OH 44115
United States

Dieter Gramlich

Baden-Wuerttemberg Cooperative State University Mosbach (DHBW) ( email )

Lohrtalweg 10
Mosbach, 74821
Germany

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