Testing for Opaqueness in the European Banking Industry: Evidence from Bond Credit Ratings

28 Pages Posted: 18 Apr 2005

Multiple version iconThere are 2 versions of this paper

Date Written: June 2004

Abstract

The question of whether banks are relatively more opaque than non-banking firms is empirically investigated by analyzing the disagreement between rating agencies (split ratings) on 2,473 bonds issued by European firms during the 1993-2003 period. Four main results emerge from the empirical analysis. First, fewer bank issues have split ratings overall, but the predicted probability of a split rating is higher for banks after controlling for risk and other issue characteristics. Second, subordinated bonds are subject to more disagreement between rating agencies. Third, bank opaqueness increases with financial assets and decreases with bank fixed assets. Fourth, bank opaqueness increases with bank size and capital ratio. The implications for regulatory policy are also discussed.

Keywords: Banks, bank regulation, bank opaqueness

JEL Classification: G20, G21, G28

Suggested Citation

Iannotta, Giuliano, Testing for Opaqueness in the European Banking Industry: Evidence from Bond Credit Ratings (June 2004). SDA Bocconi Working Paper No. 122/04. Available at SSRN: https://ssrn.com/abstract=570483 or http://dx.doi.org/10.2139/ssrn.570483

Giuliano Iannotta (Contact Author)

Università Cattolica ( email )

20123 Milano
Italy

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