TY - JOUR
T1 - How does banking market power affect bank opacity? Evidence from analysts’ forecasts
AU - Fosu, Samuel
AU - Danso, Albert
AU - Agyei-Boapeah, Henry
AU - Ntim, Collins G.
AU - Murinde, Victor
N1 - Funding Information:
We thank Brian Lucey (the Editor) and two anonymous referees for their invaluable comments. Our gratitude also goes to Andrew W. Mullineux for his suggestions on the initial draft of the paper. Victor Murinde acknowledges support from the ESRC (Grant No. ES/N013344/2) and the AXA Research Fund at SOAS University of London. All errors are our own.
Funding Information:
We thank Brian Lucey (the Editor) and two anonymous referees for their invaluable comments. Our gratitude also goes to Andrew W. Mullineux for his suggestions on the initial draft of the paper. Victor Murinde acknowledges support from the ESRC (Grant No. ES/N013344/2 ) and the AXA Research Fund at SOAS University of London. All errors are our own.
Publisher Copyright:
© 2018 Elsevier Inc.
PY - 2018/11
Y1 - 2018/11
N2 - Whilst the ongoing banking regulatory reforms towards a comprehensive Basel III framework emphasise disclosure, transparency and a competitive banking market environment, very little is known about the empirical relationship between bank opacity and banking competition. We investigate the impact of competition, as measured by the individual bank's pricing power in the banking market, on bank opacity using a large sample of US bank holding companies over the 1986–2015 period. We uncover new evidence, on the competition-bank opacity nexus, which suggests that banks with higher market power and operating in less competitive banking markets have lower analysts’ forecast errors and dispersions and may thus be less opaque. This effect is more pronounced for the 2007–09 global financial crisis period. Our evidence is robust to controlling for analysts’ characteristics, bank fixed-effects and endogeneity problems.
AB - Whilst the ongoing banking regulatory reforms towards a comprehensive Basel III framework emphasise disclosure, transparency and a competitive banking market environment, very little is known about the empirical relationship between bank opacity and banking competition. We investigate the impact of competition, as measured by the individual bank's pricing power in the banking market, on bank opacity using a large sample of US bank holding companies over the 1986–2015 period. We uncover new evidence, on the competition-bank opacity nexus, which suggests that banks with higher market power and operating in less competitive banking markets have lower analysts’ forecast errors and dispersions and may thus be less opaque. This effect is more pronounced for the 2007–09 global financial crisis period. Our evidence is robust to controlling for analysts’ characteristics, bank fixed-effects and endogeneity problems.
KW - Bank opacity
KW - Basel III framework
KW - Competition
KW - Disclosure and transparency
KW - Financial crisis
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U2 - 10.1016/j.irfa.2018.08.015
DO - 10.1016/j.irfa.2018.08.015
M3 - Article
AN - SCOPUS:85053546768
SN - 1057-5219
VL - 60
SP - 38
EP - 52
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
ER -