Horizon problems in the implementation of bank reporting regulation: evidence from China

• 成果类型: Article
• 署名作者: Hung, Mingyi; Ru, Yi; She, Guoman; Wang, Lynn Linghuan
• 署名单位: University of British Columbia; Hong Kong University of Science & Technology; Renmin University of China; National University of Singapore
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653; 1573-7136
• DOI: 10.1007/s11142-025-09927-y
• 发表日期: 2026-06
• 页码: 906-943
• 关键词: Expected credit loss; HORIZON PROBLEM; loan loss recognition; Political Incentive; GOVERNMENT-OWNED BANKS; incentives; OWNERSHIP; politicians

摘要

We investigate the role of politicians' horizon incentives in banks' response to a forward-looking provisioning model. We argue that horizon incentives, defined as the tendency of politicians to focus on short-term performance in the late stage of an official term, motivate banks to use the discretion of provisioning to obfuscate reporting. Using the mandatory shift to the expected credit loss model in China, we find that the increases in the magnitudes and timeliness of loan loss provisions following the mandatory shift are smaller for state-owned banks with late-term local governors than for other state-owned banks. Further, while the mandate reduces lending pro-cyclicality during the COVID-19 recession for state-owned banks without late-term governors prior to the recession, it has little impact on other state-owned banks. Overall, our findings suggest that politicians' horizon incentives lead to opportunistic underreporting of provisions and damp the effectiveness of financial reporting regulation in reducing lending pro-cyclicality.