Accounting discretion, loan loss provisioning, and discipline of Banks' risk-taking

• 成果类型: Article
• 署名作者: Bushman, Robert M.; Williams, Christopher D.
• 署名单位: University of Michigan System; University of Michigan; University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2012.04.002
• 发表日期: 2012
• 关键词: deposit insurance; earnings management; CAPITAL MANAGEMENT; COMMERCIAL-BANKS; moral hazard; determinants; INFORMATION

摘要

Examining banks across 27 countries, we estimate two measures of the forward-looking orientation reflected in discretionary loan provisioning practices within a country. We document that forward-looking provisioning designed to smooth earnings dampens discipline over risk-taking, consistent with diminished transparency inhibiting outside monitoring. In contrast, forward-looking provisioning reflecting timely recognition of expected future loan losses is associated with enhanced risk-taking discipline. Thus, proposals to change loan loss accounting embed significant risks of unintended consequences, as gains from reducing pro-cyclicality may be swamped by losses in transparency that dampen market discipline and increase the scope for less prudent risk-taking by banks. (C) 2012 Elsevier B.V. All rights reserved.