Public Disclosure and Riskadjusted Performance at Bank Holding Companies

This article examines the relationship between the amount of information disclosed by bank holding companies (BHCs) and the BHCs’ subsequent risk-adjusted performance. The key finding is that more disclosure is associated with higher risk-adjusted returns. This result is strongest for BHCs where trading represents a large share of overall firm activity. More disclosure does not appear to be associated with higher risk-adjusted performance during the financial crisis, however, implying that the findings are a “business as usual” phenomenon. These findings suggest that greater disclosure is associated with more efficient risk taking and thus improved risk-return trade-offs, a channel for market discipline that has not been emphasized previously in the literature.