How does transparency affect bank financial performance?

Aigbe Akhigbe, James E. McNulty and Bradley A. Stevenson

International Review of Financial Analysis, 2013, vol. 29, issue C, 24-30

Abstract: Theoretical studies suggest that increased transparency reduces a firm's cost of capital (Diamond & Verrecchia, 1991). Thus, more transparency should improve financial performance. We examine the relation between firm transparency and bank holding company (BHC) profit efficiency using the number of analysts following a BHC and the standard deviation of analysts' EPS forecasts to measure transparency. Our hypothesis is that more transparent BHCs are better managed, causing a positive relation between transparency and profit efficiency. The empirical results confirm that transparency has a positive effect on profit efficiency.

Keywords: Profit efficiency; Transparency; Stochastic frontier analysis (search for similar items in EconPapers)
JEL-codes: D02 G21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:29:y:2013:i:c:p:24-30

DOI: 10.1016/j.irfa.2013.01.007

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