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Competition and Opacity in the Financial System

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  • Gaoqing Zhang

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

Abstract

This paper studies the effect of competition on opacity in the financial system. In my model, two financial institutions competing for investors simultaneously make a public disclosure decision when both are exposed to rollover risk. I find that in the face of rollover risk, competition between financial institutions has a nonmonotonic effect on their disclosure decisions. More intense competition can reduce disclosure and make the financial system more opaque, especially when investors’ private information about the financial institutions is sufficiently precise. This paper was accepted by Suraj Srinivasan, accounting.

Suggested Citation

  • Gaoqing Zhang, 2021. "Competition and Opacity in the Financial System," Management Science, INFORMS, vol. 67(3), pages 1895-1913, March.
    • Handle: RePEc:inm:ormnsc:v:67:y:2021:i:3:p:1895-1913
    DOI: 10.1287/mnsc.2019.3512
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    References listed on IDEAS

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    Cited by:

    1. Silva, Thiago & Souza, Sérgio & Guerra, Solange & Tabak, Benjamin, 2022. "Decentralized Market Power in Credit Markets," MPRA Paper 114766, University Library of Munich, Germany.
    2. Lucas Mahieux & Haresh Sapra & Gaoqing Zhang, 2023. "CECL: Timely Loan Loss Provisioning and Bank Regulation," Journal of Accounting Research, Wiley Blackwell, vol. 61(1), pages 3-46, March.
    3. Gaoqing Zhang, 2023. "Models of Accounting Disclosure by Banking Institutions," Foundations and Trends(R) in Accounting, now publishers, vol. 17(3-4), pages 173-300, May.

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