Abstract
We study the effects of transparency disclosures on U.S. banks’ relayed culture. Using bank stress-test regulations and a regression-discontinuity design, we exploit the quasi-experimental properties around bank-size policy thresholds. We find that stress-tested banks improve their communicated risk-taking culture and overall corporate culture by improving the sentiment around drivers of risk-taking culture, such as leadership. Stress testing, however, has the unintended consequence of negatively affecting sentiment regarding teamwork and innovation. We find that only banks with strong risk-taking-culture sentiments further reduce their risk-weighted assets and risky loans while increasing profitability, highlighting the distinctive role of the risk subculture in banking.
| Original language | English |
|---|---|
| Article number | 102596 |
| Journal | Journal of Corporate Finance |
| Volume | 87 |
| DOIs | |
| State | Published - Aug 2024 |
ASJC Scopus subject areas
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management
Keywords
- Bank stress test
- Corporate culture
- Corporate risk culture
- Regression discontinuity
- Transparency disclosure
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