Bank financial reporting opacity and regulatory intervention

• 成果类型: Article
• 署名作者: Gallemore, John
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-022-09674-4
• 发表日期: 2023
• 页码: 1765-1810
• 关键词: enforcement actions; earnings management; Deposit insurance; failures; Forbearance; savings; determinants; discipline; losses; runs

摘要

I study the association between bank financial reporting opacity, measured by delayed expected loan loss recognition, and the intervention decisions made by bank regulators. Examining U.S. commercial banks during the 2007-09 financial crisis, I find that delayed expected loan loss recognition is negatively associated with the likelihood of regulatory intervention (measured by either severe enforcement action or closure). This result is robust to using various specifications and research designs. In additional analyses, I find evidence suggesting that this association is driven by regulators exploiting financial reporting opacity to practice forbearance. My findings contribute to the extant literature on bank opacity, regulatory forbearance, and the consequences of loan loss provisioning by suggesting that delayed expected loan loss recognition affects regulatory intervention decisions.