Competition and voluntary disclosure: evidence from deregulation in the banking industry |
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Authors: | Jeffrey J Burks Christine Cuny Joseph Gerakos João Granja |
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Institution: | 1.Mendoza College of Business,University of Notre Dame,Notre Dame,USA;2.Stern School of Business,New York University,New York,USA;3.Tuck School of Business,Dartmouth College,Hanover,USA;4.Booth School of Business,University of Chicago,Chicago,USA |
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Abstract: | We use the relaxation of interstate branching restrictions under the Interstate Banking and Branching Efficiency Act (IBBEA) to examine how increases in competition affect incumbents’ voluntary disclosure choices. States implemented the IBBEA over several years and to varying degrees, allowing us to identify the effect of increased competition on the voluntary disclosure decisions of both public and private banks. We find that increases in competition are associated with an increase in press releases. Overall, press releases become more negative in tone as entry barriers decrease. However, disclosures by public banks and by banks issuing equity become incrementally positive in tone when entry barriers decrease. Thus, the increase in disclosure is consistent with a dominant incentive to deter entry via negative information, which is mitigated by an incentive to communicate positive information to investors. |
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