Working Paper: NBER ID: w20760
Authors: Liangliang Jiang; Ross Levine; Chen Lin
Abstract: Did regulatory reforms that lowered barriers to competition among U.S. banks increase or decrease the quality of information that banks disclose to the public and regulators? We find that an intensification of competition reduced abnormal accruals of loan loss provisions and the frequency with which banks restate financial statements. The results indicate that competition reduces bank opacity, enhancing the ability of markets and regulators to monitor banks.
Keywords: Competition; Bank Opacity; Regulatory Reforms; Disclosure Quality
JEL Codes: D22; D4; G21; G28; G38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bank regulatory reforms (G28) | Disclosure quality (L15) |
| Increased competition (L13) | Decrease in abnormal loan loss provisions (LLPs) (G33) |
| Increased competition (L13) | Decrease in frequency of financial restatements (G38) |
| Regulatory-induced competition (L59) | Decrease in discretionary loan loss provisions (LLPs) (G33) |