Transparency in the banking sector
AbstractThe paper revisits the impact of uncertainty on the decision problem of a bank. The bank extends risky loans to private investors and sells deposits to savers at fixed rates. The uncertainty under which deposit/loan-portfolios are chosen by banks is endogenized through an information system that conveys public signals about the return distribution of bank loans. Transparency in the banking sector is defined in terms of the reliability of these signals. We find that higher transparency always raises expected bank profits, but may lead to a higher or lower expected loan volume. Moreover, higher transparency may reduce economic welfare. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 05/11.
Date of creation: 2011
Date of revision:
market transparency; banking firm;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-BAN-2012-02-20 (Banking)
- NEP-CTA-2012-02-20 (Contract Theory & Applications)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wagener, Andreas, 2003. "Comparative statics under uncertainty: The case of mean-variance preferences," European Journal of Operational Research, Elsevier, Elsevier, vol. 151(1), pages 224-232, November.
- Jacco Thijssen & Kuno Huisman & Peter Kort, 2006.
"The effects of information on strategic investment and welfare,"
Economic Theory, Springer,
Springer, vol. 28(2), pages 399-424, 06.
- J.J.J. Thijssen & K.J.M. Huisman & P.M. Kort, 2003. "The Effects of Information on Strategic Investment and Welfare," Trinity Economics Papers, Trinity College Dublin, Department of Economics 200310, Trinity College Dublin, Department of Economics.
- Citanna, Alessandro & Villanacci, Antonio, 2000.
"Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices,"
Journal of Economic Theory, Elsevier,
Elsevier, vol. 90(2), pages 222-253, February.
- Alessandro Citanna & Antonio Villanacci, . "Incomplete markets, allocative efficiency and the information revealed by prices," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 10, Carnegie Mellon University, Tepper School of Business.
- Edward E. Schlee, 2001. "The Value of Information in Efficient Risk-Sharing Arrangements," American Economic Review, American Economic Association, American Economic Association, vol. 91(3), pages 509-524, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.