Public disclosure and risk-adjusted performance at bank holding companies

Beverly Hirtle

No 293, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper examines the relationship between the amount of information disclosed by bank holding companies (BHCs) and their subsequent risk-adjusted performance. Using data from the annual reports of BHCs with large trading operations, we construct an index of publicly disclosed information about the BHCs? forward-looking estimates of market risk exposure in their trading and market-making activities. The paper then examines the relationship between this index and subsequent risk-adjusted returns in the BHCs? trading activities and for the firm overall. The key finding is that more disclosure is associated with higher risk-adjusted returns. This result is strongest for BHCs where trading represents a large share of overall firm activity. More disclosure does not appear to be associated with higher risk-adjusted performance during the financial crisis, however, suggesting that the findings are a ?business as usual? phenomenon. These findings suggest that greater disclosure is associated with more efficient risk-taking and thus improved risk-return tradeoffs, a channel for market discipline that has not been emphasized previously in the literature.

Keywords: value at risk; market discipline; disclosure; banking (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2007
New Economics Papers: this item is included in nep-ban and nep-rmg
Note: Previous title: “Public Disclosure, Risk, and Performance at Bank Holding Companies”
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Journal Article: Public disclosure and risk-adjusted performance at bank holding companies (2016)
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