Stock Market Reaction to Financial Statement Certification by Bank Holding Company CEOs

In 2002, the SEC mandated that the CEOs of large, publicly traded firms certify the accuracy of their company financial statements. The SEC's certi- fication order provides a natural experiment that gives insight into the question of whether banks are opaque. We find that the BHCs subject to the SEC's order experienced positive and significant average abnormal returns from certification. Characteristics associated with greater opaqueness— liquid asset holdings, information-intensive lending, and split credit ratings— are systematically associated with the size of abnormal returns.