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Public Disclosure and Bank Failures

Author

Listed:
  • Tito Cordella

    (International Monetary Fund)

  • Eduardo Levy Yeyati

    (International Monetary Fund)

Abstract

We study how public disclosure of banks' risk exposure affects banks' risk taking incentives and assess the impact of the presence of informed depositors on the soundness of the banking system. We find that, when banks have complete control over the volatility of their loan portfolio, public disclosure reduces the probability of banking crises. However, when banks do not control their risk esposure, the presence of informed depositors may increase the probability of bank failures.

Suggested Citation

  • Tito Cordella & Eduardo Levy Yeyati, 1998. "Public Disclosure and Bank Failures," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 110-131, March.
  • Handle: RePEc:pal:imfstp:v:45:y:1998:i:1:p:110-131
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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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