Article ID Journal Published Year Pages File Type
7408965 Journal of Financial Stability 2018 11 Pages PDF
Abstract
This paper studies the effect of information disclosure on banks' portfolio risk. We cast a simple banking system into a general equilibrium model with trading frictions. We find that the information disclosure lowers the expected risk-adjusted profits for a non-negligible fraction of banks. The magnitude of this effect depends on the structure of the banking system and, alarmingly, it is more pronounced for systemically important institutions. We connect these theoretical findings to the stress test procedure, where bank information is disclosed by the regulator. The 2011 and 2014 stress tests are used in an empirical study to further support our theoretical results.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics, Econometrics and Finance (General)
Authors
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