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Market evidence on the opaqueness of banking firms' assets

Author

Listed:
  • Mark J. Flannery
  • Simon H. Kwan
  • Mahendrarajah Nimalendran
Abstract
We assess the market microstructure properties of U.S. banking firms' equity, to determine whether they exhibit more or less evidence of asset opaqueness than similar-sized nonbanking firms. The evidence strongly indicates that large banks (traded on NASDAQ) trade much less frequently despite microstructure characteristics. Problem (noncurrent) loans tend to raise the frequency with which the bank's equity trades, as well as the equity's return volatility. The implications for regulatory policy and future market microstructure research are discussed.

Suggested Citation

  • Mark J. Flannery & Simon H. Kwan & Mahendrarajah Nimalendran, 1999. "Market evidence on the opaqueness of banking firms' assets," Working Papers in Applied Economic Theory 99-11, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfap:99-11
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