Information Content of Mandated Bank Stress Test Disclosures

Download or read book Information Content of Mandated Bank Stress Test Disclosures written by Atif Ellahie and published by . This book was released on 2018 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior studies generally question the credibility and usefulness of the disclosed outcomes of government stress tests of banks in the European Union during the recent global financial crisis. In contrast, I document robust evidence that the geographic distribution of sovereign- and credit-risk exposures disclosed in the EU stress-test results enables clear sorting of strong and weak banks on the basis of expected future performance and sovereign spillover risk. Ex ante bank specific exposure measures developed using test disclosures have predictive information content for cross-sectional variation in subsequent equity and credit returns, return volatility, the yield curve, and analyst forecast revisions.