Were Information Intermediaries Sensitive to the Financial Statement-Based Leading Indicators of Bank Distress Prior to the Financial Crisis?

• 成果类型: Article
• 署名作者: Desai, Hemang; Rajgopal, Shiva; Yu, Jeff Jiewei
• 署名单位: Southern Methodist University; Columbia University; University of Arizona
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12161
• 发表日期: 2016
• 页码: 576-606
• 关键词: SHORT-SELLERS; Fair value; analysts; DISCLOSURES; RISK; performance; services; QUALITY

摘要

In this paper, we address two questions that emerged in the aftermath of the 2008 financial/ banking crisis. First, did the financial statements of bank holding companies provide an early warning of their impending distress? Second, were the actions of four key financial intermediaries (short sellers, equity analysts, Standard and Poor's credit ratings, and auditors) sensitive to the information in the banks' financial statements about their increased risk and potential distress? We find a significant cross-sectional association between banks' 2006 Q4 financial information and bank failures over 2008-2010, suggesting that the financial statements reflected at least some of the increased risk of bank distress in advance. The mean abnormal short interest in our sample of banks increased from 0.66 percent in March 2005 to 2.4 percent in March 2007 and the association between short interest and leading financial statement indicators also increased. In contrast, we observe neither a meaningful change in analysts' recommendations, Standard and Poor's credit ratings, and audit fees nor an increased sensitivity of these actions to financial indicators of bank distress over this time period. Our results suggest that actions of short sellers likely provided an early warning of the banks' upcoming distress prior to the 2008 financial crisis.