Bank Opacity, Intermediation Cost and Globalization: Evidence from a Sample of Publicly Traded Banks in Asia

Wahyoe Soedarmono and Amine Tarazi

Working Papers from HAL

Abstract: This paper examines the relationship between opacity and the cost of intermediation in Asian banks. Using a sample of publicly traded commercial banks from 2002 to 2008, our empirical results show that higher opacity is associated with a lower intermediation cost in banking. Hence, bank managers in their efforts to overcome asymmetric information issues and to improve transparency tend to offset the higher cost of acquiring and disclosing information by increasing the cost of intermediation for entrepreneurs. Moreover, a deeper look at the country level indicates that the negative link between opacity and the cost of intermediation is reversed as globalization increases. Greater globalization therefore outweighs managerial entrenchment behavior to preserve bank opacity. Our findings highlight that bank opacity issues are even more costly in countries with higher globalization.

Date: 2013
New Economics Papers: this item is included in nep-cwa and nep-sea
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Related works:
Journal Article: Bank opacity, intermediation cost and globalization: Evidence from a sample of publicly traded banks in Asia (2013)
Working Paper: Bank opacity, intermediation cost and globalization: Evidence from a sample of publicly-traded banks in Asia (2013)
Working Paper: Bank opacity, intermediation cost and globalization: Evidence from a sample of publicly traded banks in Asia (2013)
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