Valuation and Systemic Risk Consequences of Bank Opacity

@article{Jones2011ValuationAS,
  title={Valuation and Systemic Risk Consequences of Bank Opacity},
  author={Jeffrey S. Jones and Wayne Y. Lee and Timothy J. Yeager},
  journal={Banking \& Financial Institutions},
  year={2011}
}
We examine the effects of opacity on bank valuation and the synchronicity of bank equity prices over the years 2000-2006 prior to the 2007 financial crisis. Investments in opaque assets are more profitable than transparent assets, and controlling for profitability, have larger valuation discounts relative to transparent assets. We observe a decline in the valuation discount for opaque assets over the 2000-2006 period and a sharp reversal in 2007. The decline is coincident with a rise in bank… Expand
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