The 2007-09 financial crisis and bank opaqueness

Mark Flannery, Simon Kwan and Mahendrarajah Nimalendran

No 2010-27, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Doubts about the accuracy with which outside investors can assess a banking firm?s value motivate many government interventions in the banking market. The recent financial crisis has reinforced concerns about the possibility that banks are unusually opaque. Yet the empirical evidence, thus far, is mixed. This paper examines the trading characteristics of bank shares over the period from January 1990 through September 2009. We find that bank share trading exhibits sharply different features before vs. during the crisis. Until mid-2007, large (NYSE-traded) banking firms appear to be no more opaque than a set of control firms, and smaller (NASD-traded) banks are, at most, slightly more opaque. During the crisis, however, both large and small banking firms exhibit a sharp increase in opacity, consistent with the policy interventions implemented at the time. Although portfolio composition is significantly related to market microstructure variables, no specific asset category(s) stand out as particularly important in determining bank opacity.

Keywords: Banks and banking; Stock market; Financial crises (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ban and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.frbsf.org/publications/economics/papers/2010/wp10-27bk.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2010-27

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().