Competition and Opacity in the Financial System

58 Pages Posted: 2 Aug 2019 Last revised: 9 Sep 2019

See all articles by Gaoqing Zhang

Gaoqing Zhang

University of Minnesota - Twin Cities - Department of Accounting

Date Written: July 29, 2019

Abstract

This paper studies the effect of competition on opacity in the financial system. In my model, two financial institutions competing for investors simultaneously make a public disclosure decision when both are exposed to rollover risk. I find that in the face of rollover risk, competition between financial institutions has a non-monotonic effect on their disclosure decisions. More intense competition can reduce disclosure and make the financial system more opaque, especially when investors' private information about the financial institutions is sufficiently precise.

Keywords: coordination, interbank competition, disclosure policies, rollover risk, financial institutions, bank opacity, higher-order beliefs

Suggested Citation

Zhang, Gaoqing, Competition and Opacity in the Financial System (July 29, 2019). Available at SSRN: https://ssrn.com/abstract=3428683 or http://dx.doi.org/10.2139/ssrn.3428683

Gaoqing Zhang (Contact Author)

University of Minnesota - Twin Cities - Department of Accounting ( email )

321 19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://https://carlsonschool.umn.edu/faculty/gaoqing-zhang

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