Disclosure Regulation in the Hands of Bank Regulators

Using a unique setting where stand-alone banks submit filings to bank regulators instead of the SEC, we examine the consequences of disclosure regulation in the hands of bank regulators. Consistent with theory, we find that bank regulators are less concerned about transparency than the SEC. Bank regulators’ disclosure requirements are less strict and the disclosure system maintained by bank regulators generates higher information-processing costs. Consistently, stand-alone banks make fewer disclosures and are more likely to violate filing deadlines. In addition, market reaction to filings by stand-alone banks are less timely, suggesting a cost to stock price efficiency. We also examine potential benefits of the reduced emphasis on transparency, such as timelier regulatory intervention and fewer runs on deposits. However, we do not find evidence supporting these potential benefits.