Information and contagion effects of bank loan-loss reserve announcements

Article Abstract:

The impact of banks' announcements of loan-loss reserve (LLR) additions on their share prices was examined using data from a sample of 578 LLR announcements made between 1985 and 1990. The results support the information-signaling view in that negative and statistically significant announcement effects associated with LLR announcements were found. The impact of the announcements were also found to be determined by the nature of contemporaneous earnings and dividend disclosures, to vary between regional banks and money-center banks.

Research, Prices and rates, Stocks, Economics, Securities, Stock prices, Information theory, Loan loss reserves, Information theory in economics

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Capital market frictions and the role of internal capital markets in banking

Article Abstract:

Bank holding firms allocate capital in agreement with the operations of internal capital market operated by bank holding firms. The finding supports the conjecture that bank profitability, liquidity and capital requirements may have significant effect on aggregate bank lending. It also affects the transmission of monetary policy as well as the management and regulation of commercial bank holding firms.

Analysis, Economic aspects, Capital market, Capital markets

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