Consolidation, and especially any resulting increased complexity of financial institutions, appears to have increased both the demand by market participants for and the supply by institutions of information regarding a firm's financial condition. The resulting rise in disclosures has probably improved firm transparency and encouraged market discipline and has thus lowered individual firm risk and perhaps increased financial stability.
However, the increased complexity of firms has also made them more opaque, and their increased size has the potential to augment moral hazard. Thus, the net effect of consolidation on firm transparency and market discipline is unclear. Indeed, we conclude that there appears to be considerable room for improvement in disclosures by financial institutions.