Bank risk and charter value: the role of opacity

Chris Brune, Kevin Lee and Scott Miller

International Journal of Banking, Accounting and Finance, 2021, vol. 12, issue 2, 141-157

Abstract: In this paper, we explore the linkage between bank opacity and bank charter value. We find that opacity contaminates charter value and therefore reduces the ability of charter value to restrain risk-taking in banking. As bank assets become more complex and opaque with the increased use of derivative assets like mortgage backed securities, asset backed securities, and collateralised debt obligations, etc., it becomes more difficult to gauge the true value of banks and the true risk of the bank activities.

Keywords: banks; opacity; charter value; market discipline; financial crisis. (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ids:injbaf:v:12:y:2021:i:2:p:141-157

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