An information quality-based explanation for loan loss allowance inadequacy during the 2008 financial crisis

• 成果类型: Article
• 署名作者: Yang, Ling
• 署名单位: Queens University - Canada
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101433
• 发表日期: 2022
• 关键词: mortgage; regulators; securitization; incentives; banks

摘要

I study whether commercial banks' loan loss allowances were inadequate during the 2008 financial crisis because bank managers relied on low-quality information to estimate loan losses. To measure the quality of information collected on bank-held mortgages prior to the crisis, I create a bank exposure-to-mortgage fraud risk index (EFI) that captures overstatement of borrower income in mortgage applications. I find banks that originated more loans in high-risk neighborhoods had less adequate loan loss allowances during the crisis. My study is consistent with the hypothesis that fraudulent borrower information adversely affected banks' loan loss provisioning. (C) 2021 Elsevier B.V. All rights reserved.