Public Disclosure and Bank Failures
Eduardo Levy Levy-Yeyati
Universidad Torcuato Di Tella - School of Business
IMF Working Paper No. 97/96
This paper examines how public disclosure of banks` risk exposure affects banks` risk-taking incentives and assesses how the presence of informed depositors influences the soundness of the banking system. It finds that, when banks have complete control over the volatility of their loan portfolios, public disclosure reduces the probability of banking crises. However, when banks do not control their risk exposure, the presence of informed depositors may increase the probability of bank failures.
Number of Pages in PDF File: 25
JEL Classification: D82, G14, G21, G28
Date posted: February 15, 2006