Activity Strategies, Information Asymmetry, and Bank Opacity

Networks Financial Institute Working Paper Series 2018-WP-04

39 Pages Posted: 8 Aug 2018

See all articles by Dung Tran

Dung Tran

Banking University Ho Chi Minh city; IPAG Business School

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Reza Houston

Indiana State University - Scott College of Business

Date Written: July 23, 2018

Abstract

Using a large panel of US bank holding companies from 2001 to 2015, we investigate the association between functional diversification and bank earnings management. We document a positive relationship between bank earnings management and bank diversification. Our findings are consistent with the hypothesis that diversification increases the asymmetric information of banks, leading to greater discretionary power by bank managers. This effect is most prevalent in smaller banks and non-dividend paying banks. The impact of diversification on earnings management is less pronounced during the crisis. Our study is of interest to regulators and other stakeholders who examine factors which affect behavior of bank managers.

Keywords: bank earnings management, opacity, activity strategies, diversification, information asymmetry

JEL Classification: G21, G28, G34, G38

Suggested Citation

Tran, Dung and Hassan, M. Kabir and Houston, Reza, Activity Strategies, Information Asymmetry, and Bank Opacity (July 23, 2018). Networks Financial Institute Working Paper Series 2018-WP-04, Available at SSRN: https://ssrn.com/abstract=3218337 or http://dx.doi.org/10.2139/ssrn.3218337

Dung Tran (Contact Author)

Banking University Ho Chi Minh city ( email )

36 Ton That Dam
District 1
Ho Chi Minh
Vietnam

HOME PAGE: http://https://sites.google.com/buh.edu.vn/dungtran/

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Reza Houston

Indiana State University - Scott College of Business ( email )

800 Sycamore Street
Terre Haute, IN 47809
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
21
Abstract Views
420
PlumX Metrics