We examine the relationship between bank asset and informational quality. We use a diversified panel of 699 banks from 84 countries and measure opacity (lack of informational quality) with rating disagreements between issuer-specific ratings by the Big 3 credit rating agencies (S&P, Moody’s and Fitch). We find that poor asset quality increases the probability of greater credit rating disagreements, and the assignment of a rating by S&P mitigates this effect on the rating disagreement between Moody’s and Fitch. Considering the recent regulatory requirements on the reduction and transparent reporting of non-performing loans, our findings have important policy implications.
Kladakis, G., Chen, L., & Bellos, S. K. (2020). Bank asset and informational quality. Journal of International Financial Markets, Institutions and Money, 69, https://doi.org/10.1016/j.intfin.2020.101256