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Competition and Bank Opacity

Author

Listed:
  • Liangliang Jiang

    (Lingnan University)

  • Ross Levine

    (Haas School of Business, University of California, Berkeley)

  • Chen Lin

    (Faculty of Business and Economics, University of Hong Kong)

Abstract

Did regulatory reforms that lowered barriers to competition increase or decrease the quality of information that banks disclose to the public? By integrating the gravity model of investment with the state-specific process of bank deregulation that occurred in the United States from the 1980s through the 1990s, we develop a bank-specific, time-varying measure of deregulation-induced competition. We find that an intensification of competition reduced abnormal accruals of loan loss provisions and the frequency with which banks restate financial statements. The results suggest that competition reduces bank opacity, potentially enhancing the ability of markets to monitor banks.

Suggested Citation

  • Liangliang Jiang & Ross Levine & Chen Lin, 2016. "Competition and Bank Opacity," Working Papers 052016, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:052016
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    JEL classification:

    • 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
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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