Bank opacity and risk-taking: Evidence from analysts' forecasts. By Victor Murinde
THIS EVENT IS ARCHIVED
Victor Murinde (SOAS)
Date: 25 October 2017Time: 1:00 PM
Finishes: 25 October 2017Time: 3:00 PM
Venue: Paul Webley Wing (Senate House) Room: SG36
Type of Event: Seminar
This seminar features the paper on "Bank opacity and risk-taking: Evidence from analysts’ forecasts" by Samuel Fosu, Collins G.Ntim, William Coffie, and Victor Murinde
This paper has been highighted in the interview between Professor Victor Murinde and Mr Laurent Clavel, Head of macroeconomic research at AXA Investment Managers.
We depart from existing literature by invoking analysts’ forecasts to measure banking system opacity and then investigate the impact of such opacity on bank risk-taking, using a large panel of US bank holding companies, over the 1995–2013 period. We uncover three new results. Firstly, we find that opacity increases insolvency risks among banks. Secondly, we establish that the relationship between opacity and bank risk-taking is accentuated by the degree of banking market competition. Thirdly, we show that the bank business model moderates the risk-taking incentives of opaque banks, albeit only marginally. Overall, these findings suggest that the analysts forecast measure of bank opacity is useful for understanding risk-taking by publicly-traded banks, with important implications for bank stability.
Bank opacity, Analysts’ forecasts, Bank stability, Banking market competition, Bank business models
A full paper is available to view: Bank opacity and risk-taking: Evidence from analysts’ forecasts (pdf; 1173kb)