Economic consequences of mandatory auditor reporting to bank regulators

• 成果类型: Article
• 署名作者: Balakrishnan, Karthik; De George, Emmanuel T.; Ertan, Aytekin; Scobie, Hannah
• 署名单位: Rice University; University of Miami; University of London; London Business School; University of London
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101431
• 发表日期: 2021
• 关键词: supervision; inference; QUALITY; RISK

摘要

We study the economic consequences of mandates that require bank auditors to report to bank regulators. Based on survey responses from the European Central Bank, all 28 national bank regulators within the European Union, and a review of national banking regulations, we create a novel dataset on these mandates. Exploiting the cross-sectional and time-series variation in these mandates, we find evidence that auditor reporting to bank regulators reduces bank riskiness, as measured by counterparty risk and credit spreads. We also observe a decline in problem loans and risk-weighted assets, as well as improvements in timeliness of loan loss provisions. Additional analyses suggest that mandated auditor reporting increases the effectiveness of supervisory and monitoring efforts and improves market discipline of banks. However, mandated auditor reporting comes with costs: it reduces future lending growth, risky lending, and profitability, and increases audit fees paid by shareholders. (c) 2021 Elsevier B.V. All rights reserved.