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Bank Opacity, Intermediation Cost and Globalization: Evidence from a Sample of Publicly Traded Banks in Asia

  • Wahyoe Soedarmono

    ()

    (Universitas Siswa Bangsa Internasional, Faculty of Business / Sampoerna School of Business - un)

  • Amine Tarazi

    ()

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - Université de Limoges : EA1088 - Institut Sciences de l'Homme et de la Société)

This paper examines the relationship between opacity and the cost of intermediation in Asian banks. Using a sample of publicly traded commercial banks from 2002 to 2008, our empirical results show that higher opacity is associated with a lower intermediation cost in banking. Hence, bank managers in their efforts to overcome asymmetric information issues and to improve transparency tend to offset the higher cost of acquiring and disclosing information by increasing the cost of intermediation for entrepreneurs. Moreover, a deeper look at the country level indicates that the negative link between opacity and the cost of intermediation is reversed as globalization increases. Greater globalization therefore outweighs managerial entrenchment behavior to preserve bank opacity. Our findings highlight that bank opacity issues are even more costly in countries with higher globalization.

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Paper provided by HAL in its series Working Papers with number hal-00916564.

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Date of creation: 2013
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Handle: RePEc:hal:wpaper:hal-00916564
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