" />
Economic Policy Review
Public Disclosure and Risk-Adjusted Performance at Bank Holding Companies
August 2016 Volume 22, Number 1
JEL classification:  E58, G21, G32, M41
Author: Beverly Hirtle
This article examines the relationship between the amount of information disclosed by bank holding companies (BHCs) and the BHCs’ subsequent risk-adjusted performance. Using data from the annual reports of BHCs with large trading operations, the author constructs an index that quantifies the BHCs’ public disclosure of forward-looking estimates of market risk exposure in their trading and market-making activities. She then examines the relationship between this index and subsequent risk-adjusted returns in the BHCs’ trading activities and for the firm overall. The key finding is that more disclosure is associated with higher risk-adjusted returns. This result is strongest for BHCs whose trading represents a large share of overall firm activity. More disclosure does not appear to be associated with higher risk-adjusted performance during the financial crisis, however, implying that the findings are a “business as usual” phenomenon. These findings suggest that greater disclosure is associated with more efficient risk taking and thus improved risk-return trade-offs, a channel for market discipline that has not been emphasized previously in the literature.
Available only in PDF 30 pages / 1.1 mb
Press release
By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close