Does Fair Value Accounting Exacerbate the Procyclicality of Bank Lending?

• 成果类型: Article
• 署名作者: Xie, Biqin
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12103
• 发表日期: 2016
• 页码: 235-274
• 关键词: TO-MARKET; contribute; panacea; finance

摘要

This study investigates whether fair value accounting contributes to the procyclicality of bank lending. Using banks' approval/denial decisions on residential mortgage applications to capture banks' supply of credit, I find no evidence that fair value accounting has procyclical effects on bank lending over the past two business cycles. I further identify two reasons for this result. First, the main accounting item distinguishing fair value accounting from historical cost accountingunrealized gains and losses on available-for-sale securitiesdoes not affect lending decisions. Second, unrealized gains and losses on available-for-sale securities are not procyclical, as the risk-free interest rate rises during some expansionary periods, resulting in unrealized losses, while the risk-free interest rate (and sometimes the default spread) falls during some recessionary periods, resulting in unrealized gains.