Credit and bank opaqueness: How to avoid financial crises?

Abstract

This study makes a contribution to the literature on bank opaqueness and bank credit through empirical evidence gathered from data of 310 NYSE and NASDAQ banks for the period 1Q1990 to 4Q2009. In addition to developing an opacity index based on bank risk information, the empirical analysis identifies and considers events of credit sudden stops. The main conclusion is that a decrease in bank opaqueness fosters an environment favorable to the development of a sound banking system, which, in turn, facilitates the strengthening of the credit chain and the avoidance of financial crises.