Title: Bank risk and charter value: the role of opacity

Authors: Chris Brune; Kevin Lee; Scott Miller

Addresses: Frank D. Hickingbotham School of Business, Ouachita Baptist University, USA ' John H. Sykes College of Business, University of Tampa, USA ' John H. Sykes College of Business, University of Tampa, USA

Abstract: In this paper, we explore the linkage between bank opacity and bank charter value. We find that opacity contaminates charter value and therefore reduces the ability of charter value to restrain risk-taking in banking. As bank assets become more complex and opaque with the increased use of derivative assets like mortgage backed securities, asset backed securities, and collateralised debt obligations, etc., it becomes more difficult to gauge the true value of banks and the true risk of the bank activities.

Keywords: banks; opacity; charter value; market discipline; financial crisis.

DOI: 10.1504/IJBAAF.2021.114476

International Journal of Banking, Accounting and Finance, 2021 Vol.12 No.2, pp.141 - 157

Received: 28 Jan 2019
Accepted: 08 Oct 2019

Published online: 01 Mar 2021 *

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