July 19, 2024Journal of money credit and banking

Precision of Public Information Disclosures, Banks' Stability, and Welfare

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Authors

DMDiego MorenoBank of Finland TTTuomas TakaloUniversity of Helsinki

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Implication

Theoretical analysis reveals that precise public disclosure increases bank risk taking, suggesting maximum stability is reached in opaque financial environments.

Key Points

Increasing the precision of public disclosure regarding asset quality lowers the cost of funding for sound institutions and encourages greater risk taking.
Maximum bank stability is reached in opaque environments, whereas optimal surplus requires transparency only when social costs of bank failure remain small.
Theoretical model analysis demonstrates that optimal disclosure rules depend on the social costs of failure, highlighting trade-offs between opacity and welfare.

Cite This Study

Moreno et al. (2024) studied this question.

synapsesocial.com/papers/68e5fb74b6db64358758f58e https://doi.org/10.1111/jmcb.13194

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Implication

Theoretical analysis reveals that precise public disclosure increases bank risk taking, suggesting maximum stability is reached in opaque financial environments.

Precision of Public Information Disclosures, Banks' Stability, and Welfare

Discussion

Member takes

Implication

Key Points

Cite This Study

Precision of Public Information Disclosures, Banks' Stability, and Welfare

Discussion

Member takes

Implication

Key Points

Cite This Study

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Also Consider