Market and Supervisory Information: Some Evidence from Italian Banks

Francesco Cannata and Mario Quagliariello

Discussion Papers from Department of Economics, University of York

Abstract: There is an increasing debate on the potential use of the signals arising from financial markets as a complement to the information set available to supervisors. Following this stream of research, this paper provides for the first time some empirical evidence on Italian banks, using a unique dataset matching accounting ratios, equity-market variables and supervisory judgements. More specifically, we analyse the behaviour of four well-used equity-based indicators for the Italian banks whose shares were listed on the Milan stock exchange between 1995 and 2002 and look at the correlation across banks and across indicators, verifying what type of signal (if any) different variables are able to convey. Moreover, we investigate whether equity-based indicators provide additional information for supervisors with respect to the set of data they usually rely on, assuming the supervisory ratings as a benchmark.

Keywords: Bank; supervision; market discipline; early warning (search for similar items in EconPapers)
JEL-codes: E58 G14 G21 G28 (search for similar items in EconPapers)
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