 The impact of opacity on bank valuation during the global financial crisis: A channel analysisYi Zheng and Da Wu International Review of Financial Analysis, 2023, vol. 87, issue C Abstract: Prior literature suggests that opacity in the banking industry is mainly caused by a lack of informativeness in the assessment of the quality of bank assets. Examining a sample of bank holding companies in the United States, we find that there is a negative relationship between opacity and bank valuation during the 2007–2009 global financial crisis. We further attempt to identify two potential channels through which opacity negatively affects bank valuation during the financial crisis: a cash flow channel and an expected return channel. We show that one channel flows from bank profitability, measured by return on equity and return on assets, confirming a cash flow channel, whereas an expected return channel, proxied by the implied cost of capital, only works for small banks. Overall, this study sheds light on the relationship between in-transparency and bank value discount during a global recession. Keywords: Opacity; Bank valuation; Financial crisis; Cash flow; Expected return (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923000960 DOI: 10.1016/j.irfa.2023.102580 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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