Financial Transparency and Sources of Hidden Capital in Turkish Banks
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This paper investigates how changes in regulatory and economic environments affect the transparency of banks’ financial-statements. Reregulation and a volatile economy make Turkish banks the ideal sample. I disaggregate sources of both hidden and booked capital in Turkish banks traded on the Istanbul Stock Exchange between 1988 and 2006. Hidden capital account for the difference between the accounting and opportunity-cost measures of a firm’s net worth. Increases in hidden capital in crisis periods indicate a greater reliance on government-contributed safety-net capital. The increase in hidden capital is more pronounced for large banks. Too-Big-To-Fail policies may explain why large banks are the beneficiaries of government-contributed capital.
KeywordsTransparency Financial safety net Turkish financial crisis
The author would like to express her gratitude to Edward Kane for his guidance and mentoring. The author would also like to thank Haluk Ünal, the anonymous referee, and Hassan Tehranian for their insightful suggestions that helped improve the paper.
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