Bischof, Jannis, Laux, Christian, Leuz, Christian. 2021. Accounting for Financial Stability: Bank Disclosure and Loss Recognition in the Financial Crisis. Journal of Financial Economics.
BibTeX
Abstract
This paper examines banks’ disclosures and loss recognition in the financial crisis and identifies several core issues for the link between accounting and financial stability. Our analysis suggests that, going into the financial crisis, banks’ disclosures about relevant risk exposures were relatively sparse. Such disclosures came later after major concerns about banks’ exposures had arisen in markets. Similarly, the recognition of loan losses was relatively slow and delayed relative to prevailing market expectations. Among the possible explanations for this evidence, our analysis suggests that banks’ reporting incentives played a key role, which has important implications for bank supervision and the new expected loss model for loan accounting. We also provide evidence that shielding regulatory capital from accounting losses through prudential filters can dampen banks’ incentives for corrective actions. Overall, our analysis reveals several important challenges if accounting and financial reporting are to contribute to financial stability. Keywords: Banks, Financial crisis, Financial stability, Disclosure, Loan loss accounting, Expected credit losses, Incurred loss model, Prudential filter, Fair value accounting
Tags
Press 'enter' for creating the tagPublication's profile
Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | Journal of Financial Economics |
Citation Index | SSCI |
WU Journalrating 2009 | A+ |
Starjournal | Y |
Language | English |
Title | Accounting for Financial Stability: Bank Disclosure and Loss Recognition in the Financial Crisis |
Year | 2021 |
DOI | https://doi.org/10.1016/j.jfineco.2021.05.016 |
Open Access | N |
JEL | G21, G22, G28, G32, G38, K22, M41, M42, M48 |
Associations
- People
- Laux, Christian (Details)
- External
- Bischof, Jannis (Universität Mannheim, Germany)
- Leuz, Christian (University of Chicago Booth School of Business, United States/USA)
- Organization
- Institute for Finance, Banking and Insurance IN (Details)