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Federal Reserve Bank of Chicago
Working Paper Series
The informational advantage of specialized monitors: the case of bank examiners
Robert DeYoung
Mark J. Flannery
William W. Lang
Sorin M. Sorescu
Abstract

Large commercial banking firms are monitored by specialized private sector monitors and by specialized government examiners. Previous research suggests that bank exams produce little useful information that is not already reflected in market prices. In this article, we apply a new research methodology to a unique data set, and find that government exams of large national banks produce significant new information which financial markets do not fully internalize for several additional months. Our results indicate that specialized government monitors can identify value-relevant information about private firms, even if those firms are already actively followed by investors and their private-sector agents.


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Robert DeYoung & Mark J. Flannery & William W. Lang & Sorin M. Sorescu, The informational advantage of specialized monitors: the case of bank examiners, Federal Reserve Bank of Chicago, Working Paper Series WP-98-4, 1998.
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Keywords: Bank supervision ; Bank examination
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