Veranstaltung
19
Nov 2018

14:15 - 15:45
IWH Research Seminar

Debtholder Monitoring and Earnings Opacity

We show that debtholder monitoring reduces earnings opacity. Using a natural experiment in the U.S. banking industry that subordinates junior creditors’ claims, we find that exposing junior creditors to greater losses in bankruptcy significantly reduces earnings opacity.

Wer
Referent: Professor Klaus Schäck , University of Bristol
Wo
IWH-Konferenzsaal
Referent: Professor Klaus Schäck

Zur Person

Referent: Professor Klaus Schäck

Klaus Schaeck is a Professor of Banking and Finance at the School of Economics, Finance and Management at the University of Bristol. Prior to his appointment at Bristol, Klaus was a Professor of Finance at Lancaster University and a Professor of Empirical Banking at Bangor University. Earlier in his career he also held positions at Cass Business School and at the University of Southampton.

We show that debtholder monitoring reduces earnings opacity. Using a natural experiment in the U.S. banking industry that subordinates junior creditors’ claims, we find that exposing junior creditors to greater losses in bankruptcy significantly reduces earnings opacity. This effect is driven by limiting banks’ propensity to overstate earnings and is concentrated among banks that rely more on funding provided by junior creditors, consistent with market discipline. Our findings highlight the importance of junior creditors’ monitoring incentives in curbing earnings smoothing, reducing information asymmetries, and improving the quality of information that banks disclose to the public to limit bank opacity.

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