Following the Basel Committee’s advocacy of value-at-risk (VaR) disclosure in external reports of financial institutions, the U.S. Securities and Exchange Commission issued Financial Reporting Release No. 48 to permit VaR disclosure as one of the most important disclosure approaches for market-risk quantitative information in 1997. This study is the first to empirically examine both economic determinants and consequences of VaR disclosure informativeness in the banking industry. First, this study finds that more informative VaR disclosure is associated with more effective corporate governance characteristics, including better shareholder protection, a larger and more independent board, the presence of a separate risk committee under the board of directors, a more independent risk committee, higher institutional ownership and a better overall governance environment. These results suggest that corporate governance mechanisms are important determinants of the informativeness of VaR disclosure. Second, the evidence shows that the cost of equity capital is negatively associated with the informativeness of VaR disclosure, consistent with informative VaR disclosure effectively communicating private information to investors about both a bank’s market risk exposure and its risk management system. Additional evidence during the recent crisis further suggests the importance of VaR disclosure informativeness to the capital market as a strong signal reflecting the efficacy of risk managem