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How does banking market power affect bank opacity? Evidence from analysts’ forecasts

How does banking market power affect bank opacity? Evidence from analysts’ forecasts
How does banking market power affect bank opacity? Evidence from analysts’ forecasts
Whilst the ongoing banking regulatory reforms towards a comprehensive Basel III framework emphasise bank transparency, disclosure 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.
Bank opacity, competition, financial crisis, disclosure and transparency, Basel III framework
1057-5219
38-52
Fosu, Samuel
20135acd-447a-44ab-b5c7-949477e89121
Agyei-Boapeah, Henry
37005f29-d453-458e-b6b5-cd92e55587a4
Danso, Albert
a78c616e-5975-49b3-825c-f3f6b617b02b
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Murinde, Victor
7a7f1f3a-def6-42ea-b135-133cf11a41f1
Fosu, Samuel
20135acd-447a-44ab-b5c7-949477e89121
Agyei-Boapeah, Henry
37005f29-d453-458e-b6b5-cd92e55587a4
Danso, Albert
a78c616e-5975-49b3-825c-f3f6b617b02b
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Murinde, Victor
7a7f1f3a-def6-42ea-b135-133cf11a41f1

Fosu, Samuel, Agyei-Boapeah, Henry, Danso, Albert, Ntim, Collins and Murinde, Victor (2018) How does banking market power affect bank opacity? Evidence from analysts’ forecasts. International Review of Financial Analysis, 60, 38-52. (doi:10.1016/j.irfa.2018.08.015).

Record type: Article

Abstract

Whilst the ongoing banking regulatory reforms towards a comprehensive Basel III framework emphasise bank transparency, disclosure 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.

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Competition Opacity - Accepted Manuscript
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Accepted/In Press date: 26 August 2018
e-pub ahead of print date: 20 September 2018
Published date: November 2018
Keywords: Bank opacity, competition, financial crisis, disclosure and transparency, Basel III framework

Identifiers

Local EPrints ID: 423487
URI: https://eprints.soton.ac.uk/id/eprint/423487
ISSN: 1057-5219
PURE UUID: 9e3a6a72-2bcf-4b30-8e80-f1136cef2a72
ORCID for Henry Agyei-Boapeah: ORCID iD orcid.org/0000-0003-4798-6324
ORCID for Collins Ntim: ORCID iD orcid.org/0000-0002-1042-4056

Catalogue record

Date deposited: 24 Sep 2018 16:30
Last modified: 10 Dec 2019 02:03

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Contributors

Author: Samuel Fosu
Author: Albert Danso
Author: Collins Ntim ORCID iD
Author: Victor Murinde

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