Opaqueness and Bank Risk Taking

Patrick Behr ()
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Patrick Behr: Brazilian School of Public and Business Administration (EBAPE)

Brazilian Review of Finance, 2012, vol. 10, issue 4, 499-527

Abstract: This paper investigates the relationship between opaqueness and bank risk taking. Using a sample of 199 banks from 38 countries over the period January 1996 to December 2006, I analyze whether more opaque banks are riskier than less opaque banks. I find suggestive evidence that commonly used proxies for bank opaqueness are significantly related to bank risk taking as measured by the Merton PD and the bank-individual Z-score, even after accounting for potential simultaneity between risk taking and opaqueness. More opaque banks seem to engage more in risk taking than less opaque banks. This result provides support to the common view that bank opaqueness is problematic and that transparency among financial institutions should be increased.

Keywords: Banks; Opaqueness; Risk Taking; Bank Regulation (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:10:y:2012:i:4:p:499-527

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