Abstract
We exploit cross-country variation in banks’ confidential reporting requirements under COREP, the common European supervisory risk reporting framework, as an indicator for banking supervisors’ preference for private information. Our results suggest that a stronger preference for confidential reporting is associated with significantly lower trading volume, return volatility, and absolute returns around banks’ earnings announcements. These findings are independent of the level of countries’ stock market development and supervisors’ resources and legal power, and are consistent with the idea that investors perceive banks’ public reporting to be less informative when supervisors have a strong private informational advantage. Our study adds to the literature on the influence of bank supervisors’ institutional characteristics on market discipline, and highlights the role of private supervisory knowledge in shaping investors’ monitoring incentives.
Original language | English |
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Article number | 106572 |
Journal | Journal of Banking and Finance |
Volume | 143 |
Early online date | 7 Jun 2022 |
DOIs | |
Publication status | Published - Oct 2022 |
Bibliographical note
Funding Information:We thank Jannis Bischof, Joachim Gassen, Martien Lubberink, Edith Leung, Jeroen Suijs, conference participants at the EAA Annual Conference 2018, and workshop participants at Erasmus University Rotterdam for their helpful comments. We thank Fanny Tallgren for research assistance.
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