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The informational advantage of specialized monitors: the case of bank examiners

Robert DeYoung, Mark Flannery, William W. Lang and Sorin M. Sorescu

No WP-98-4, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Large commercial banking firms are monitored by specialized private sector monitors and by specialized government examiners. Previous research suggests that bank exams produce little useful information that is not already reflected in market prices. In this article, we apply a new research methodology to a unique data set, and find that government exams of large national banks produce significant new information which financial markets do not fully internalize for several additional months. Our results indicate that specialized government monitors can identify value-relevant information about private firms, even if those firms are already actively followed by investors and their private-sector agents.

Keywords: Bank supervision; Bank examination (search for similar items in EconPapers)
Date: 1998
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