Banks' Incentives and Inconsistent Risk Models

• 成果类型: Article
• 署名作者: Plosser, Matthew C.; Santos, Joao A. C.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - New York; Universidade Nova de Lisboa
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy028
• 发表日期: 2018
• 页码: 2080
• 关键词: disclosure; credit; loans; price

摘要

This paper investigates banks' incentive to bias the risk estimates they report to regulators. Within loan syndicates, we find that banks with less capital report lower risk estimates. Consistent with an effort to mitigate capital requirements, the sensitivity to capital is robust to bank fixed effects and greater for large, risky, and opaque credits. Also, low-capital banks' risk estimates have less explanatory power than those of high-capital banks with regard to loan prices, indicating that their estimates incorporate less information. Our results suggest banks underreport risk in response to capital constraints and highlight the perils of regulation premised on self-reporting.