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Comparing market and supervisory assessments of bank performance: who knows what when?

Allen Berger (), Sally M. Davies and Mark Flannery

No 1998-32, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We compare the timeliness and accuracy of government supervisors versus market participants in assessing the condition of large U.S. bank holding companies. We find that supervisors and bond rating agencies both have some prior information that is useful to the other. In contrast, supervisory assessments and equity market indicators are not strongly interrelated. We also find that supervisory assessments are much less accurate overall than both bond and equity market assessments in predicting future changes in performance, but supervisors may be more accurate when inspections are recent. To some extent, these results may reflect differing incentives of the parties. We compare the timeliness and accuracy of government supervisors versus market participants in assessing the condition of large U.S. bank holding companies. We find that supervisors and bond rating agencies both have some prior information that is useful to the other. In contrast, supervisory assessments and equity market indicators are not strongly interrelated. We also find that supervisory assessments are much less accurate overall than both bond and equity market assessments in predicting future changes in performance, but supervisors may be more accurate when inspections are recent. To some extent, these results may reflect differing incentives of the parties.

Keywords: Bank holding companies; Bank management (search for similar items in EconPapers)
Date: 1998, Revised 1998
New Economics Papers: this item is included in nep-fmk and nep-ifn
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Related works:
Journal Article: Comparing market and supervisory assessments of bank performance: who knows what when? (2000)
Journal Article: Comparing Market and Supervisory Assessments of Bank Performance: Who Knows What When? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:1998-32

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