Financial Regulation and Transparency of Information: first steps on new land

Helder de Mendonça (), Délio Galvão and Renato Loures

No 248, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This article examines the relationship between the level of regulation and transparency of financial institutions from 37 countries and the impacts of the subprime crisis on the stock market, through a regulation and transparency index. Furthermore, with the objective of detecting reasons for the success of some emerging economies in avoiding the crisis, empirical evidence for the presence of market discipline in the Brazilian banking industry is shown. The results are that a higher degree of regulation and transparency is related to higher returns and lower volatility in the stock market during the subprime crisis. Moreover, one of the main reasons for the apparent success of the Brazilian case in facing the crisis is the combination of a strong regulation of the financial system and the presence of market discipline.

Date: 2011-08
New Economics Papers: this item is included in nep-ban and nep-reg
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Citations: View citations in EconPapers (4)

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