The impact of voluntary capital adequacy disclosure on bank lending and liquidity creation

Natalya Zelenyuk*, Robert Faff, Shams Pathan

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Using a sample of 40 US banks that make voluntary disclosure of capital adequacy, we investigate the extent to which such voluntary disclosures influence growth in bank lending and liquidity creation. Combining two theories linked to the performance effects of (i) voluntary disclosure and (ii) leverage adjustment, we document novel evidence in favour of our hypotheses: a positive relation between voluntary bank disclosure and bank lending (liquidity creation). Our analysis provides some evidence that these positive linkages occur through a cost of capital channel.

Original languageEnglish
Pages (from-to)3915-3935
Number of pages21
JournalAccounting and Finance
Volume61
Issue number3
Early online date18 Sep 2020
DOIs
Publication statusPublished - Sep 2021
Externally publishedYes

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