Mandatory Disclosure and Financial Contagion ∗

@inproceedings{Alvarez2013MandatoryDA,
  title={Mandatory Disclosure and Financial Contagion ∗},
  author={Fernando Alvarez and Gadi Barlevy},
  year={2013}
}
This paper explores whether mandatory disclosure of bank balance sheet information can improve welfare. In our benchmark model, mandatory disclosure can raise welfare only when markets are frozen, i.e. when investors refuse to fund banks in the absence of balance sheet information. Even then, intervention is only warranted if there is sufficient contagion across banks, in a sense we make precise within our model. In the same benchmark model, if in the absence of balance sheet information… CONTINUE READING
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