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The impact of voluntary capital adequacy disclosure on bank lending and liquidity creation

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  • Natalya Zelenyuk
  • Robert Faff
  • Shams Pathan

Abstract

Using a sample of 40 US banks that make voluntary disclosure of capital adequacy, we investigate the extent to which such voluntary disclosures influence growth in bank lending and liquidity creation. Combining two theories linked to the performance effects of (i) voluntary disclosure and (ii) leverage adjustment, we document novel evidence in favour of our hypotheses: a positive relation between voluntary bank disclosure and bank lending (liquidity creation). Our analysis provides some evidence that these positive linkages occur through a cost of capital channel.

Suggested Citation

  • Natalya Zelenyuk & Robert Faff & Shams Pathan, 2021. "The impact of voluntary capital adequacy disclosure on bank lending and liquidity creation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 3915-3935, September.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:3:p:3915-3935
    DOI: 10.1111/acfi.12720
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    2. Gupta, Juhi & Kashiramka, Smita & Ly, Kim Cuong & Pham, Ha, 2023. "The interrelationship between bank capital and liquidity creation: A non-linear perspective from the Asia-Pacific region," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 793-820.

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