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Banking Fragility and Disclosure: International Evidence

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  • Solomon Tadesse

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Abstract

Motivated by recent public policy debates on the role of market discipline in banking stability, I examine the impact of greater bank disclosure in mitigating the likelihood of systemic banking crisis. In a cross sectional study of banking systems across 49 countries in the 90s, I find that banking crises are less likely in countries with financial reporting regimes characterized by (i) comprehensive disclosure (ii) informative disclosure, (iii) timely disclosure and (iv) more stringent auditing.

Suggested Citation

  • Solomon Tadesse, 2005. "Banking Fragility and Disclosure: International Evidence," William Davidson Institute Working Papers Series wp748, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2005-748
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40134/3/wp748.pdf
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    References listed on IDEAS

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    1. Cull, Robert & Senbet, Lemma W & Sorge, Marco, 2005. "Deposit Insurance and Financial Development," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 43-82, February.
    2. Asli Demirgüç-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises; Evidence From Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
    3. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
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    5. Demirguc-Kunt, Asli & Detragiache, Enrica, 2002. "Does deposit insurance increase banking system stability? An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1373-1406, October.
    6. Barth, James R.*Caprio,Gerard*Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
    7. Marcel Canoy & Machiel van Dijk & Jan Lemmen & Ruud de Mooij & Jürgen Weigand, 2001. "Competition and stability in banking," CPB Document 15, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Hoggarth, Glenn & Reis, Ricardo & Saporta, Victoria, 2002. "Costs of banking system instability: Some empirical evidence," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 825-855, May.
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    Citations

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    Cited by:

    1. Hartarska, Valentina, 2005. "Governance and performance of microfinance institutions in Central and Eastern Europe and the Newly Independent States," World Development, Elsevier, vol. 33(10), pages 1627-1643, October.
    2. Angkinand, Apanard & Wihlborg, Clas, 2010. "Deposit insurance coverage, ownership, and banks' risk-taking in emerging markets," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 252-274, March.
    3. Giannetti, Mariassunta, 2007. "Financial liberalization and banking crises: The role of capital inflows and lack of transparency," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 32-63, January.
    4. Tumer-Alkan, G., 2008. "Essays on banking," Other publications TiSEM 8d5ec521-4702-4e75-bc79-a, Tilburg University, School of Economics and Management.
    5. Patrick Van Roy, 2008. "Transparency in banking," Financial Stability Review, National Bank of Belgium, vol. 6(1), pages 133-147, June.
    6. Penas, M.F. & Tumer-Alkan, G., 2008. "Bank Disclosure and Market Assessment of Financial Fragility : Evidence from Banks' Equity Prices," Discussion Paper 2008-013, Tilburg University, Tilburg Law and Economic Center.

    More about this item

    Keywords

    Banking Crisis; Disclosure; Transparency; Audit Stringency;

    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

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