Differential valuation implications of loan loss provisions across banks and fiscal quarters

• 成果类型: Article
• 署名作者: Liu, CC; Ryan, SG; Wahlen, JM
• 署名单位: New York University; University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• 发表日期: 1997
• 页码: 133-146
• 关键词: disclosures

摘要

Prior research has found that loan loss provisions are positively associated with bank stock returns and future cash flows, conditional on less discretionary information about loan default. We find that these positive valuation implications obtain only for loan loss provisions for low regulatory capital ban ks in the fourth fiscal quarter. Our regulatory capital-based tests are motivated by the idea that increased discretionary loan loss provisions are plausibly good news only for banks which appear to have loan default risk problems based on prior information. Our fiscal quarter tests are motivated by findings in prior literature that suggest that managers have incentives to delay income decreasing accruals until the fourth quarter when the audit occurs, implying that income decreasing accruals are more likely, and therefore more expected, in the fourth quarter than in other fiscal quarters (Mendenhall and Nichols 1988; Boyd et al. 1993).