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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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    References listed on IDEAS

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    Cited by:

    1. Gianni La Cava, 2016. "Housing prices, mortgage interest rates and the rising share of capital income in the United States," BIS Working Papers 572, Bank for International Settlements.
    2. repec:eee:jbfina:v:88:y:2018:i:c:p:442-454 is not listed on IDEAS
    3. Liangliang Jiang & Ross Levine & Chen Lin, 2017. "Does Competition Affect Bank Risk?," NBER Working Papers 23080, National Bureau of Economic Research, Inc.
    4. Vittoria, Cerasi & Sebastian, Deininger & Leonardo, Gambacorta & Tommaso, Oliviero, 2017. "How post-crisis regulation has affected bank CEO compensation," Working Papers 365, University of Milano-Bicocca, Department of Economics, revised 28 Apr 2017.
    5. Viet-Dung Tran & M. Kabir Hassan & Reza Houston, 2018. "Ownership Structure and Bank Risk: The Effects of Crisis, Market Discipline and Regulatory Pressure," NFI Working Papers 2018-WP-03, Indiana State University, Scott College of Business, Networks Financial Institute.
    6. Viet-Dung Tran & M. Kabir Hassan & Reza Houston, 2018. "Discretionary Loan-Loss Provision Behavior in the US Banking Industry," NFI Working Papers 2018-WP-01, Indiana State University, Scott College of Business, Networks Financial Institute.
    7. Ross Levine & Chen Lin & Zigan Wang, 2017. "Acquiring Banking Networks," NBER Working Papers 23469, National Bureau of Economic Research, Inc.

    More about this item

    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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