Post by Sapphire Capital on Jul 26, 2008 20:56:58 GMT 4
Bank Disclosure and Market Assessment of Financial Fragility: Evidence from Banks' Equity Prices
Maria Fabiana Penas
Tilburg University - CentER and TILEC
Gunseli Tumer-Alkan
Tilburg University; Center for Financial Studies
March 1, 2008
TILEC Discussion Paper No. 2008-013
Abstract:
The most recent literature on crises points out that financial fragility in the banking and/or corporate sector are at the root of financial crises. In this paper we explore how Turkish shareholders reacted to changes in their banks' measures of financial fragility during the years prior to the 2000/2001 crisis, and how the quality and timeliness of the disclosure affect market reaction. We find that shareholders reacted negatively to indicators of financial fragility such as increases in maturity mismatches, currency mismatches, and non-performing loans, showing shareholders' concerns about the impact of financial fragility indicators on future profits. We also find that improvements in disclosure requirements, such as the Banks Act in 1999, increase the informativeness of accounting statements, and that audited statements that show larger reporting lags, are not informative, pointing to the need of improving their timeliness. Finally our study also suggests that the finding that securities prices react to financial fragility indicators should not be taken as sufficient evidence of banks' safety and soundness.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1010366_code663947.pdf?abstractid=1010366&mirid=3
Maria Fabiana Penas
Tilburg University - CentER and TILEC
Gunseli Tumer-Alkan
Tilburg University; Center for Financial Studies
March 1, 2008
TILEC Discussion Paper No. 2008-013
Abstract:
The most recent literature on crises points out that financial fragility in the banking and/or corporate sector are at the root of financial crises. In this paper we explore how Turkish shareholders reacted to changes in their banks' measures of financial fragility during the years prior to the 2000/2001 crisis, and how the quality and timeliness of the disclosure affect market reaction. We find that shareholders reacted negatively to indicators of financial fragility such as increases in maturity mismatches, currency mismatches, and non-performing loans, showing shareholders' concerns about the impact of financial fragility indicators on future profits. We also find that improvements in disclosure requirements, such as the Banks Act in 1999, increase the informativeness of accounting statements, and that audited statements that show larger reporting lags, are not informative, pointing to the need of improving their timeliness. Finally our study also suggests that the finding that securities prices react to financial fragility indicators should not be taken as sufficient evidence of banks' safety and soundness.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1010366_code663947.pdf?abstractid=1010366&mirid=3