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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

Fosu, Samuel; Danso, Albert; Agyei-Boapeah, Henry; Ntim, Collins G; Murinde, Victor

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


Authors

Samuel Fosu

Albert Danso

Henry Agyei-Boapeah

Collins G Ntim

Victor Murinde



Abstract

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

Citation

Fosu, S., Danso, A., Agyei-Boapeah, H., Ntim, C. G., & Murinde, V. (2018). How does banking market power affect bank opacity? Evidence from analysts' forecasts How does banking market power affect bank opacity? Evidence from analysts' forecasts. International Review of Financial Analysis, 60, 38-52. https://doi.org/10.1016/j.irfa.2018.08.015

Journal Article Type Article
Acceptance Date Aug 26, 2018
Online Publication Date Aug 30, 2018
Publication Date Nov 28, 2018
Deposit Date Jul 5, 2021
Publicly Available Date Mar 29, 2024
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 60
Pages 38-52
DOI https://doi.org/10.1016/j.irfa.2018.08.015
Keywords Bank opacity; Competition; Financial crisis; Disclosure and transparency; Basel III framework
Public URL https://nottingham-repository.worktribe.com/output/5756740
Publisher URL https://www.sciencedirect.com/science/article/pii/S1057521918300103

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