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The 11th Finance Workshop held

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Date: November 25th, Thurs.  17:15-18:45

Speaker: Mr Takanori Tanaka (Kansai University)

Title: Bank market competition and the quality of management forecasts

 

(Abstract)

This study examines the relation between bank market competition and the quality of management forecasts. Using a sample of Japanese banks over the period 2007-2019, I find robust evidence that banks with higher competitive power are likely to issue more biased earnings forecasts. I furthermore explore the channels which drive this finding. I find that banks with higher competitive power are more likely to issue optimistic earnings forecasts and engage in risk-taking behaviors. Overall, these results are consistent with the view that strong competitive power encourages banks to increase risk-taking behaviors, thereby leading to more biased earnings forecasts.

Key words: management forecasts; bank market competition; optimism; risk-taking

JEL classification: G32, G34

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