Abstract
We depart from existing literature by invoking analysts’ forecasts to measure banking system opacity and then investigate the impact of such opacity on bank risk-taking, using a large panel of US bank holding companies, over the 1995–2013 period. We uncover three new results. Firstly, we find that opacity increases insolvency risks among banks. Secondly, we establish that the relationship between opacity and bank risk-taking is accentuated by the degree of banking market competition. Thirdly, we show that the bank business model moderates the risk-taking incentives of opaque banks, albeit only marginally. Overall, these findings suggest that the analysts forecast measure of bank opacity is useful for understanding risk-taking by publicly-traded banks, with important implications for bank stability.
Original language | English |
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Pages (from-to) | 81-95 |
Number of pages | 15 |
Journal | Journal of Financial Stability |
Volume | 33 |
DOIs | |
Publication status | Published - Dec 2017 |
Externally published | Yes |
Keywords
- Analysts’ forecasts
- Bank business models
- Bank opacity
- Bank stability
- Banking market competition
ASJC Scopus subject areas
- Finance
- Economics, Econometrics and Finance(all)