Bank Opacity and Risk-Taking: Evidence from Analysts’ Forecasts

Fosu, S., Ntim, C.G., Coffie, W., and Murinde, V. (2017). ‘Bank Opacity and Risk-Taking: Evidence from Analysts’ Forecasts’, Journal of Financial Stability, 33, 81-95.

40 Pages Posted: 6 Jan 2018

See all articles by Samuel Fosu

Samuel Fosu

De Montfort University; University of Birmingham - Birmingham Business School

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

William Coffie

University of Ghana - University of Ghana Business School (UGBS)

Victor Murinde

University of London - School of Oriental and African Studies (SOAS)

Date Written: January 4, 2018

Abstract

We depart from existing literature by invoking analysts’ forecasts to measure banking system opacity and then investigate the impact of such opacity on bank risk-taking, using a large panel of US bank holding companies, 1995-2013. We uncover three new results. Firstly, we find that opacity increases insolvency risks among banks. Secondly, we establish that the relationship between opacity and bank risk-taking is accentuated by the degree of banking market competition. Thirdly, we show that the bank business model moderates the risk-taking incentives of opaque banks, albeit only marginally. Overall, these findings suggest that the analysts’ forecast measure of bank opacity is useful for understanding risk-taking by publicly-traded banks, with important implications for bank stability.

Keywords: Bank Opacity; Risk-taking; Analysts’ Forecasts; Bank Stability; US Banks; Banking Market Competition; Bank Business Models

JEL Classification: G01; G14; G21; L11

Suggested Citation

Fosu, Samuel and Ntim, Collins G. and Coffie, William and Murinde, Victor, Bank Opacity and Risk-Taking: Evidence from Analysts’ Forecasts (January 4, 2018). Fosu, S., Ntim, C.G., Coffie, W., and Murinde, V. (2017). ‘Bank Opacity and Risk-Taking: Evidence from Analysts’ Forecasts’, Journal of Financial Stability, 33, 81-95.. Available at SSRN: https://ssrn.com/abstract=3096656

Samuel Fosu (Contact Author)

De Montfort University ( email )

Leicester, LE1 9BH
United Kingdom

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

Collins G. Ntim

University of Southampton Business School, UK ( email )

Southampton Business School
Highfield
Southampton, England SO17 IBJ
United Kingdom
+44 (0) 238059 4285 (Phone)
+44 (0) 238059 3844 (Fax)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

William Coffie

University of Ghana - University of Ghana Business School (UGBS) ( email )

Volta Rd
Accra
Ghana

Victor Murinde

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom
02078984057 (Phone)

HOME PAGE: http://https://www.soas.ac.uk/staff/staff120377.php

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