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

Natalya Zelenyuk, Robert Faff and Shams Pathan

Accounting and Finance, 2021, vol. 61, issue 3, 3915-3935

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.

Date: 2021
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