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Stock Market Reaction to Financial Statement Certification by Bank Holding Company CEOs

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  • Hirtle, Beverly

Abstract

In 2002, the SEC mandated that the CEOs of large, publicly traded firms certify the accuracy of their company financial statements. The SEC's certification order provides a natural experiment that gives insight into the question of whether banks are opaque. We find that the BHCs subject to the SEC's order experienced positive and significant average abnormal returns from certification. Characteristics associated with greater opaqueness-liquid asset holdings, information-intensive lending, and split credit ratings-are systematically associated with the size of abnormal returns.

Suggested Citation

  • Hirtle, Beverly, 2006. "Stock Market Reaction to Financial Statement Certification by Bank Holding Company CEOs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1263-1291, August.
  • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:5:p:1263-1291
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    File URL: http://dx.doi.org/10.1353/mcb.2006.0072
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    References listed on IDEAS

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    1. Flannery, Mark J. & Kwan, Simon H. & Nimalendran, M., 2004. "Market evidence on the opaqueness of banking firms' assets," Journal of Financial Economics, Elsevier, vol. 71(3), pages 419-460, March.
    2. Bhattacharya, Utpal & Groznik, Peter & Haslem, Bruce, 2007. "Is CEO certification of earnings numbers value-relevant?," Journal of Empirical Finance, Elsevier, vol. 14(5), pages 611-635, December.
    3. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    4. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    5. Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
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    Cited by:

    1. Choi, Dong Boem & Eisenbach, Thomas M. & Yorulmazer, Tanju, 2015. "Watering a lemon tree: heterogeneous risk taking and monetary policy transmission," Staff Reports 724, Federal Reserve Bank of New York, revised 01 Nov 2017.
    2. Christina E. Bannier & Patrick Behr & Andre Güttler, 2010. "Rating opaque borrowers: why are unsolicited ratings lower?," Review of Finance, European Finance Association, vol. 14(2), pages 263-294.
    3. Michael R King & Steven Ongena & Nikola Tarashev, 2016. "Bank standalone credit ratings," BIS Working Papers 542, Bank for International Settlements.
    4. Flannery, Mark & Hirtle, Beverly & Kovner, Anna, 2017. "Evaluating the information in the federal reserve stress tests," Journal of Financial Intermediation, Elsevier, vol. 29(C), pages 1-18.
    5. Iannotta, Giuliano & Kwan, Simon H., 2013. "The Impact of Reserves Practices on Bank Opacity," Working Paper Series 2013-35, Federal Reserve Bank of San Francisco, revised 01 Jul 2014.
    6. Guo Li & Lee Sanning & Sherrill Shaffer, 2009. "Statistical Opacity In The U.S. Banking Industry," CAMA Working Papers 2009-16, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    7. Tri Vi Dang & Gary Gorton & Bengt Holmström & Guillermo Ordoñez, 2017. "Banks as Secret Keepers," American Economic Review, American Economic Association, pages 1005-1029.
    8. repec:eee:corfin:v:45:y:2017:i:c:p:176-202 is not listed on IDEAS
    9. Flannery, Mark J. & Kwan, Simon H. & Nimalendran, Mahendrarajah, 2013. "The 2007–2009 financial crisis and bank opaqueness," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 55-84.
    10. Karlo Kauko, 2016. "Does Opaqueness Make Equity Capital Expensive for Banks?," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, vol. 17(2), pages 203-227, February.
    11. Premti, Arjan & Garcia-Feijoo, Luis & Madura, Jeff, 2017. "Information content of analyst recommendations in the banking industry," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 35-47.
    12. repec:eee:finsta:v:32:y:2017:i:c:p:115-123 is not listed on IDEAS

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