Quotation Goncharenko, Roman, Pinto, Roberto, Hledik, Juraj. 2018. The dark side of stress tests: Negative effects of information disclosure. Journal of Financial Stability. 37 49-59.


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Abstract

This paper studies the effect of information disclosure on banks’ portfolio risk. We cast a simple banking system into a general equilibrium model with trading frictions. We find that the information disclosure lowers the expected risk-adjusted profits for a non-negligible fraction of banks. The magnitude of this effect depends on the structure of the banking system and, alarmingly, it is more pronounced for systemically important institutions. We connect these theoretical findings to the stress test procedure, where bank information is disclosed by the regulator. The 2011 and 2014 stress tests are used in an empirical study to further support our theoretical results.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Financial Stability
Citation Index SSCI
WU-Journal-Rating new FIN-A, VW-C, WH-B
Language English
Title The dark side of stress tests: Negative effects of information disclosure
Volume 37
Year 2018
Page from 49
Page to 59
Reviewed? Y
URL https://doi.org/10.1016/j.jfs.2018.05.003
DOI http://dx.doi.org/10.1016/j.jfs.2018.05.003
Open Access N
JEL D50; D80; G21

Associations

People
Goncharenko, Roman (Former researcher)
Pinto, Roberto (Former researcher)
Hledik, Juraj (Former researcher)
Organization
Institute for Financial Research IN (Details)
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