Abstract
We examine the potential use of signals arising from financial markets as a complement to the information set available to banking supervisors. We provide empirical evidence on Italian banks, using a unique dataset matching accounting ratios, market variables, and supervisory ratings. To verify what type of signal they are able to convey, we analyze the behavior of four equity-based indicators for the Italian banks listed on the Milan stock exchange. We then investigate whether the same indicators provide additional information for supervisors. Econometric results confirm the informative content of market variables and their complementarity with supervisory information.
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JEL Classification: Bank, banking supervision, early warning, market discipline
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Cannata, F., Quagliariello, M. The Value of Market Information in Banking Supervision: Evidence from Italy. J Finan Serv Res 27, 139–162 (2005). https://doi.org/10.1007/s10693-005-6666-y
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DOI: https://doi.org/10.1007/s10693-005-6666-y