We investigate the effect of bank transparency on systematic and idiosyncratic risk in the stock market. Using the extent of individual banks’ timely recognition of expected loan losses and the amount of discretionary loan loss provisions as proxies for bank transparency, we find that more transparent banks are associated with lower idiosyncratic, and total, stock market risk. We also find that banks that use more discretionary loan loss provisions are associated with a lower ratio of systematic to idiosyncratic risk. In addition, the effect of bank transparency on stock market risk is mainly observed during the financial crisis period. Our results are robust to alternative transparency measures, the possibility of a non-linear relationship, and application of a dimensionality reduction procedure, and offer empirical evidence that providing more bank-specific information about loan portfolio risk mitigates uncertainty about a bank’s future events.

中文翻译：

---

银行透明度与市场对银行风险的认知

我们调查了银行透明度对股票市场系统性和特殊性风险的影响。使用个别银行及时确认预期贷款损失的程度和可自由支配的贷款损失准备金金额作为银行透明度的代表，我们发现更透明的银行与更低的特殊性和总体股票市场风险相关。我们还发现，使用更多酌情贷款损失准备金的银行与较低的系统风险与特殊风险的比率相关。此外，银行透明度对股市风险的影响主要在金融危机期间观察到。我们的结果对于替代透明度措施、非线性关系的可能性以及降维程序的应用都是稳健的，